The Willingness of Auditee Personnel to Convey Negative Information to Internal Versus External Auditors

Abstract

This study examines the willingness of information systems (IS) professionals to report critical negative information to an auditor about a major systems implementation. Borrowing from the whistle-blowing literature, we develop a model to test the influence of key variables on the choice of reporting channel. A decision case was administered to experienced IS developers. Consistent with the model, expectations as to whether management will correct the problems has a significant effect on the choice of to whom to report. The respondents are more likely to use direct organizational channels (i.e., go over the head of their immediate supervisor) than to convey the project's problems to an auditor when the expectancy that management will correct the problems is high. Conversely, respondents are more likely to convey the project's problems to an auditor when the expectancy that management will correct the problems is low. Neither promise of confidentiality nor perceptions of negative consequences have a direct effect on whistle-blowing but rather combine so that confidentiality is important only when the IS professionals perceive negative consequences to be likely. Finally, the respondents are more willing to report problems to an internal auditor than to an external auditor.

Keywords: Mum Effect, Whistleblowing, Internal Auditing, Project Escalation

JEL Classification: M41, M49, G34