Whistleblowing in Accounting, A Moral Imperative or Career Suicide?

Whistleblowing in accounting has become a significant topic due to the growing demand for transparency and accountability. This article aims to explore the moral dilemma accountants face when deciding whether to blow the whistle and to analyze its impact on their careers. 

Through case study analysis and a review of current literature, this study identifies the factors that influence whistleblowing decisions and their consequences for individuals and organizations. 

The results indicate that while whistleblowing is often seen as a courageous act that reflects professional integrity, many accountants feel torn between their moral obligation and the substantial risks to their careers. 

This article recommends that organizations foster an environment that supports whistleblowing by providing safe reporting channels and protecting whistleblowers from retaliation, thereby promoting transparency and ethical practices in accounting.

In the accounting world, there are two opposing views on whistleblowing behavior. Some view whistleblowing as a moral obligation necessary to maintain integrity and transparency within a company. They believe that exposing errors or violations is an ethical duty and should be encouraged. Conversely, others see whistleblowing as a career risk, potentially tarnishing one's reputation and professional future. 

They fear that revealing mistakes may be perceived as unprofessional and lead to serious consequences. But are both perspectives valid? Is whistleblowing truly a moral obligation that must be upheld, or is it merely a career threat that should be avoided? In this article, we will explore the factors influencing whistleblowing behavior in the accounting profession and assess whether it is fundamentally a moral obligation or a career hazard.

 Whistleblowing is defined as "the disclosure by organization members (former or current) of illegal, immoral, or illegitimate practices under the control of their employers, to persons or organizations that may be able to effect action" (Near and Miceli, 1985, 4 ). 

The term has its origins in seventh-century England, stemming from the Latin phrase, "qui tam pro domino rege quam pro se ipso in hac parte sequitur" (Beck, 1999, 539), which means "he who prosecutes for himself as well as for the king." The phrase is synonymous with modern whistleblowers, "who sue corrupt companies on behalf of their government" (Beck, 1999, 539). 

Whistleblowing legislation evolved over centuries to encourage the disclosure of unethical practices, and these tips are the most prevalent method of fraud detection (ACFE, 2022). As a result, Practitioners and academics focus on how best to cultivate a culture that promotes whistleblowing (ACFE, 2022; Suryanto, 2017). Given the extensive literature on whistleblowing, it is crucial to consolidate findings to provide researchers and practitioners with a comprehensive understanding of the current state of whistleblowing research. 

Individuals are more likely to blow the whistle when they perceive a higher responsibility for reporting. Perceived responsibility of reporting is an individual's assessment of their duty to report an action in violation of justice, honesty, or economic standards (Graham, 1986). 

Graham's (1986) theoretical construct laid the groundwork for subsequent studies in whistleblowing literature, further developed by Miceli et al. (1991) and Shultz et al. (1993). Prior research supports this relationship across various countries, including the United States, Norway, and France (Schultz et al., 1993), as well as Barbados (Alleyne et al., 2017). 

Whistleblowing is a crucial issue in accounting, as it can help prevent major scandals like Enron, which highlighted the consequences of a lack of transparency and ethics in financial reporting. This action is not merely about reporting mistakes, but is also a moral responsibility to protect the public from harm caused by unethical business practices. 

Despite its positive potential, whistleblowing is often seen as "career suicide" due to the significant risks whistleblowers face, such as the possibility of being fired and social stigmatization in the workplace. Therefore, it is essential for organizations to foster a culture that encourages whistleblowing, supported by clear policies and legal protections for those who come forward.

A report from the Association of Certified Fraud Examiners (ACFE) indicates that many fraud cases are uncovered through whistleblowing. For example, 42% of fraud cases are identified through reports from employees exposing unethical behavior. Organizations with strong internal controls tend to have higher whistleblowing rates because employees feel safer reporting misconduct without fear of retaliation. 

Laws like the Public Interest Disclosure Act (PIDA) provide legal protection for whistleblowers, ensuring they can report wrongdoing without jeopardizing the public's trust or the company's reputation. 

Whistleblowing presents a complex moral dilemma, requiring individuals to choose between the ethical obligation to report wrongdoing and the potential risks to their careers. On one hand, whistleblowing is viewed as a moral duty to uphold the integrity of the organization and protect the public from unethical practices. 

On the other hand, many perceive it as a threat to career stability due to the possibility of corporate retaliation and the social stigma whistleblowers may face. A notable example is the case of Mordechai Vanunu, who exposed information about Israel's nuclear weapons program in 1986.

 Although his actions were considered morally justified, he faced severe repercussions, including imprisonment and social ostracism. This case illustrates that while whistleblowing can enhance organizational integrity, individuals who engage in it often endure significant negative impacts on their careers and personal lives. 

A supportive organizational culture is essential for motivating individuals to report violations. Organizations with a strong ethical culture, as described in research by Carolina and Wulandari (2022), tend to have more whistleblowers. With an effective internal reporting system and legal protections for whistleblowers, individuals are more likely to report unethical actions because they feel safe and respected.

Support for whistleblowers involves not only having an internal reporting system but, also educating all members of the organization on the importance of whistleblowing. Education that covers expected ethical standards, how to report violations, and the protections available to whistleblowers can increase individuals' awareness and willingness to report. Personal motivations, such as ethical values, also play an important role in the decision to become a whistleblower.  

Individuals with strong ethical values are more inclined to confront ethical conflicts and report unethical actions, even when facing potential risks. Deontological theory, which asserts that actions are valuable because they are performed out of duty, reinforces the idea that telling the truth is an obligation and an ethical act. Previous experiences also influence the decision to become a whistleblower.

 Individuals who have had positive experiences from reporting in the past, such as not facing negative consequences and receiving support from the organization, are more likely to report again. Conversely, negative experiences may make individuals hesitant to report in the future. 

Whistleblowing in accounting presents a complex moral dilemma. On the one hand, disclosing unethical or illegal acts is commendable because it can prevent financial losses, protect the company's reputation, and promote transparency. However, the decision to become a whistleblower is not easy. The risks of job loss, reputational damage, retaliation, and psychological distress are ever-present. 

Factors such as moral values, risk perception, organizational climate, social support, and legal protection also influence an individual's decision to speak up. 

This dilemma underscores the conflict between individual interests and the public good, as well as the challenges of fostering a work environment that supports courageous action for the greater good. 

To encourage healthy whistleblowing, comprehensive efforts are essential. Organizations must foster an open and supportive work culture, provide safe and easily accessible reporting channels, and protect whistleblowers from retaliation. Additionally, raising awareness of the significance of whistleblowing through education and training for all employees is crucial. 

The role of government and professional institutions is also vital in creating a conducive environment for whistleblowing, which includes enacting laws that protect whistleblowers and strictly enforcing professional codes of ethics. In this way, whistleblowing can serve as an effective mechanism to prevent and address unethical actions within organizations. 

Whistleblowing has both positive and negative consequences. On one hand, as explained above, promote positive changes in organizational culture. It can also serve as a positive example for other employees. However, whistleblowers often face risks such as job loss, damage to their personal reputation, retaliation, and severe emotional and psychological stress. They may even experience social isolation. Therefore, the decision to become a whistleblower is a complex dilemma, requiring individuals to weigh moral considerations against the personal risks they may encounter.

An individual's decision to blow the whistle is influenced by a multitude of factors, including moral compass such as honesty, integrity, and justice, risk perception based on the severity of the misconduct, potential personal consequences, and the likelihood of retaliation, organizational climate characterized by open communication, trust, respect for employees, and clear reporting channels, social support from colleagues, family, and friends, and legal protections against retaliation.

A healthy work environment with a strong organizational culture is crucial in fostering a supportive atmosphere for whistleblowing. Such an environment should provide clear reporting mechanisms and robust protections for those who come forward. Additionally, government bodies and professional institutions play a pivotal role in creating a supportive ecosystem for whistleblowing by establishing legal safeguards and enforcing strict ethical standards.

Moreover, the media plays a significant role in shaping public opinion and encouraging change by shedding light on whistleblowing cases. By doing so, whistleblowing can serve as a powerful tool for maintaining organizational integrity and preventing ethical violations. The following are the implied provisions of the Indonesian laws and regulations;

Hendro, 2017 : libertysites