Auditing with a Chance of Whistleblowing

• 成果类型: Article; Early Access
• 署名作者: Nan, Lin; Tang, Chao; Ye, Minlei
• 署名单位: Purdue University System; Purdue University; Hong Kong University of Science & Technology; University of Toronto; University Toronto Mississauga
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2024.04808
• 发表日期: 2025
• 关键词: whistleblowing; Audit quality; Regulatory enforcement

摘要

This paper investigates the impact of promoting whistleblowing on audit quality and the efficiency of detecting misstatements. On the one hand, whistleblowing alerts the enforcer to the possibility of a misstatement and intensifies the regulatory effort, thereby incentivizing the auditor to improve audit quality. On the other hand, promoting whistleblowing reduces the enforcer's investigative effort when there is no whistleblowing allegation, which in turn dampens the auditor's incentive to enhance audit quality. We demonstrate that, under certain conditions, encouraging more whistleblowing can impair audit quality and reduce detection efficiency. We also examine the socially optimal whistleblowing program, and our analysis implies that the optimal whistleblowing intensity is increasing in investment cost and the quality of the whistleblower's information.