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Whistleblowing regulations and the role of audit committees: insight from interviews

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A Correction to this article was published on 17 November 2021

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Abstract

Corporate governance guidelines recommend, and regulations in Canada and the US require that audit committees be actively involved in the whistleblowing process. Recognizing the lack of research based on direct evidence on the role of audit committees in the whistleblowing process and responding to calls for research on audit committees using different methods, we provide evidence on the audit committee’s actual role based on interviews with both audit committee members and auditors. We find audit committees provide limited oversight and do not play an active role in the whistleblowing process. We find audit committees tend to rely on management and internal audit. This contrasts with assumptions in prior research and the legal requirement in Canada. Our findings highlight the importance of an ethical organizational culture for the whistleblowing process to be effective. The findings also emphasize that regulators and practitioners need to recognize the potential gap between what is expected of audit committees and what they do in practice. Rather than assuming audit committees play an active role in the whistleblowing process, research needs to focus on the black box of the audit committee process and contributions to governance.

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Notes

  1. In the United States, according to the Sarbanes–Oxley Act (SOX) “Each audit committee shall establish procedures for the receipt, retention, and treatment of complaints received by the issuer regarding accounting, internal accounting controls, or auditing matters; and the confidential, anonymous submission by employees of the issuer of concerns regarding questionable accounting or auditing matters” (Sarbanes–Oxley Act, 2002, Section 301).

  2. We recognize the exploratory nature of our study. By adopting a qualitative approached, our aim is to gain a deeper understanding of the audit committees’ role. Our objective is not the generalization of our results.

  3. The analysis of secondary archival data was not a suitable method for our research objective. Likewise, further testing the relationship between audit committee characteristics and whistleblowing outcomes was not appropriate for better understanding the audit committee’s actual role. We considered other research methods, such as experiments and surveys (see Latan et al., 2018). Surveys were not appropriate, given the sensitive nature of our research questions and given our need for open-ended discussions with auditors and audit committee members. As for experiments, they already exist in the whistleblowing literature (see Gao & Brink, 2017) and they would have provided us with only indirect evidence based on inference from a controlled environment.

  4. Only Canadian listed companies are required to comply with Canadian regulations on the audit committee role (NI 52–110).

  5. The questions related to whistleblowing are included in interviews that were conducted as part of a larger project that addresses the role of the audit committee in general. The interviews were conducted mainly face to face. We conducted telephone interviews for participants from distant locations. We did not notice any difference between face-to-face interviews and those conducted by telephone.

  6. The number of interviews in our study is comparable with past audit committee research that are interview based (e.g. Gendron and Bedard (2006), Turley and Zaman (2007) and Salleh and Stewart (2012) are based on 21, 9 and 21 interviews respectively).

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Acknowledgements

We thank the CPA Québec Foundation for their gracious financial support. We also thank the audit committee members and auditors who generously participated in our interviews. This research project received approval from our institution’s ethics committee.

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Authors and Affiliations

  1. University of Québec in Montréal, Montréal, Canada

    Hanen Khemakhem, Richard Fontaine & Nadia Smaili

  2. Hull University, Hull, UK

    Mahbub Zaman

Authors
  1. Hanen Khemakhem
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  2. Richard Fontaine
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  3. Nadia Smaili
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  4. Mahbub Zaman
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Correspondence to Hanen Khemakhem.

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The original version of this article was revised. In the original publication of the article the author name “Nadia Smaili” was incorrectly written as “Nadia Smaali”.

Appendix 1: Interview guide

Appendix 1: Interview guide

1.1 Section A: Participant information

  1. 1.

    How long have you been in your current position?

  2. 2.

    What is your educational background?

  3. 3.

    What is your main professional experience?

  4. 4.

    How many boards are you involved in?

1.2 Section B: Whistleblowing process

  1. 1.

    How would you describe the role of the audit committee in the whistleblowing process?

  2. 2.

    According to you, what are the audit committee responsibilities in the whistleblowing process?

  3. 3.

    Do you think that the whistleblowing process that is in place protects companies against fraud? Why?

  4. 4.

    Do you have any ideas on how to improve the whistleblowing process in your organization?

  5. 5.

    How would you describe the steps that follow whistleblowing? (penalties, criminal charges)? How is the audit committee involved in those steps?

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Khemakhem, H., Fontaine, R., Smaili, N. et al. Whistleblowing regulations and the role of audit committees: insight from interviews. J Manag Gov 27, 131–151 (2023). https://doi.org/10.1007/s10997-021-09602-9

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