COSO Matters: Internal Control Perception Mediates Whistleblowing

• In Event: 1.04 Ethics in Decision Making

Abstract

ABSTRACT
This study explores how perceived internal control strength differs between for-profit and non-profit entities, as well as examining the effect of employees’ perception of the strength of the COSO framework within their organization on whistleblowing intentions. Two hundred seventy-two individuals employed in either for-profit or non-profit organizations participated in the survey. We find that perceived strength of controls is greater in for-profit organizations that in non-profit organizations. We also find that the control and monitoring activities components of the COSO framework mediate the relation between organization type and reporting intentions. Additional analysis indicates the intention to whistleblow is determined by COSO being mandated. Thus, people may be more likely to whistleblow in a system they know protects them, rather than one they think is strong. The COSO internal control framework and components are not only vital in deterring fraud, but also in encouraging employees to come forward and report fraud discoveries.

Key Words: Whistleblowing, reporting intentions, COSO, non-profit, organization type.
JEL Classifications: M40, M48

Authors

• Andrea Scheetz, Radford University

• Tonya D.W. Smalls, Clark Atlanta University

• Joseph M Wall, Marquette University

• Aaron Wilson, Ohio University