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Fraud Detection, Conservatism and Political Economy of Whistle Blowing

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  • K. Ozili Peterson

Abstract

This paper presents a discussion on whistle-blowing and take the view that whistle-blowing is an important fraud detection technique. A discussion of some factors that influence the whistle-blowers’ incentive to blow the whistle or to remain silent in the face of persuasive fraud red flags, is also presented. The paper suggests that the tradeoff between the cost and benefit of whistle-blowing may compel the whistle-blower to apply some degree of conservatism in their whistle-blowing activities. Also, some discussion on how whistle-blowing might be influenced by firm-level politics, country-level political economy, firm ownership and other institutional factors is presented. Finally, although the provision of incentives can increase the appeal to encourage whistle-blowing, the appeal to blow the whistle may be weakened when the whistle-blower takes into account the larger context that influence the decision to blow the whistle or to remain silent.

Suggested Citation

  • K. Ozili Peterson, 2016. "Fraud Detection, Conservatism and Political Economy of Whistle Blowing," Academic Journal of Interdisciplinary Studies, Richtmann Publishing Ltd, vol. 5, November.
    • Handle: RePEc:bjz:ajisjr:1511
    DOI: 10.5901/ajis.2016.v5n3p17
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    References listed on IDEAS

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    1. Alexander Dyck & Adair Morse & Luigi Zingales, 2010. "Who Blows the Whistle on Corporate Fraud?," Journal of Finance, American Finance Association, vol. 65(6), pages 2213-2253, December.
    2. Heungsik Park & John Blenkinsopp & Myeongsil Park, 2014. "The Influence of an Observer’s Value Orientation and Personality Type on Attitudes Toward Whistleblowing," Journal of Business Ethics, Springer, vol. 120(1), pages 121-129, March.
    3. Ozili, Peterson K, 2015. "Forensic Accounting and Fraud: A Review of Literature and Policy Implications," MPRA Paper 77236, University Library of Munich, Germany.
    4. Klein, April, 2002. "Audit committee, board of director characteristics, and earnings management," Journal of Accounting and Economics, Elsevier, vol. 33(3), pages 375-400, August.
    5. Shleifer, Andrei & Wolfenzon, Daniel, 2002. "Investor protection and equity markets," Journal of Financial Economics, Elsevier, vol. 66(1), pages 3-27, October.
    6. William J. Read & D.V. Rama, 2003. "Whistle‐blowing to internal auditors," Managerial Auditing Journal, Emerald Group Publishing Limited, vol. 18(5), pages 354-362, July.
    Full references (including those not matched with items on IDEAS)

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