Whistleblowers have been credited for uncovering financial scandals in companies globally, including Enron, Olympus Corporation, and WorldCom. Despite increasing support and incentives for whistleblowing, there generally remains reluctance to blow the whistle. Thus, the purpose of this study is to review: (1) the determinants of internal and external whistleblowing on accounting-related misconduct, (2) U.S. whistleblowing legislation on accounting-related misconduct and related research, and (3) the effects of whistleblowing on firms and whistleblowers. Within each area, suggestions for future research are offered.

Introduction

Whistleblowing is the practice of disclosing questionable practices involving an organization or its members, internally or externally (Chiasson, Johnson, & Byington, 1995). Whistleblowing is an effective mechanism to detect fraud (Association of Certified Fraud Examiners, 2014; Deloitte Forensic Center, 2010; KPMG, 2010) and the accounting profession plays an important role in the whistleblowing process. Accountants and auditors are likely to witness accounting-related misconduct, thereby presenting them the opportunity to blow the whistle on misconduct (Liyanarachchi & Adler, 2011; Miethe & Rothschild, 1994). Regulators have acknowledged the importance of whistleblowers in unraveling accounting-related misconduct, stating “whistleblowers who report their concerns to the SEC [Securities and Exchange Commission] perform a great service to investors and help us combat fraud” (SEC, 2014) and “insiders may hold the key to helping our investigators unlock intricate fraudulent schemes” (SEC, 2015). Whistleblowing on accounting-related misconduct has become an important topic and receives attention in the mainstream media (Morgenson, 2017; Vaughan, 2017), in practitioner journals (Andrews & Leblanc, 2013; Archambeault & Webber, 2015), and, increasingly, in scholarly research journals (e.g. Carcello, Hermanson, & Ye, 2011; Trompeter, Carpenter, Desai, Jones, & Riley Jr, 2012 call for more research on whistleblowing in the accounting context). Although there are prior reviews of the whistleblowing literature (see for e.g. Mesmer-Magnus & Viswesvaran, 2005; Near, 1992, 2005; Miceli, Near, & Dworkin, 2008; Near & Miceli, 1996; Vadera, Aguilera, & Caza, 2009), it is important to understand whistleblowing in the accounting context because different types of wrongdoings are inherently different in nature and therefore result in different whistleblowing processes (Dandekar, 1990; Near, Rehg, Van Scotter, & Miceli, 2004).1 The whistleblowing literature in the accounting context is diverse with rapid growth in recent years. This growth has been driven by the important implication of whistleblowing for firms and its stakeholders as well as the heightened concern about retaliation against whistleblowing. The topic has been examined through a variety of theoretical lens, using archival (see for e.g. Bowen, Call, & Rajgopal, 2010; Call, Kedia, & Rajgopal, 2016; Lee & Fargher, 2017), experimental (see for e.g. Arnold & Ponemon, 1991; Boo et al., 2016; Kaplan, Pany, Samuels, & Zhang, 2009b ; Seifert, Sweeney, Joireman, & Thornton, 2010) and survey research methods (see for e.g. Alleyne, Charles-Soverall, Broome, & Pierce, 2017; Reckers-Sauciuc & Lowe, 2010; Schultz, Johnson, Morris, & Dyrnes, 1993). The whistleblowing literature in the accounting context not only represents a great variety of perspectives, but also covers a wide range of research questions and issues. Despite the importance and breadth of whistleblowing literature in the accounting context, no comprehensive review of this literature is available.2 The objective of paper is to synthesize the substantial volume of empirical work in the whistleblowing literature in the accounting context. This paper also attempts to identify critical gaps in our current knowledge in this area and to suggest potentially fruitful areas for future research.