External whistleblowing by Maltese auditors : an assessment

Abstract

Purpose: The main aim of this study is to examine auditors' and regulators' perceptions of external whistleblowing during audit engagements. The study seeks to observe the frequency and nature of auditors' external reporting under the current Maltese legislative framework. More specifically this study analyses how Maltese legislation could be extended in a way to consolidate auditors' reporting responsibilities and ultimately enhance protection of the public at large. Design: Qualitative semi-structured interviews were conducted with the two possible ends of the whistleblowing process: auditors and regulators. The total number of interviewees was fifteen; eight auditors and seven regulators. Findings: Local auditors' reporting responsibilities on their clients are limited to the financial services industries and any illegal acts. For this reason the majority of auditors rarely report their clients externally, while if they do report it is because they are bound by law. Otherwise they will either report internally or resign from the engagement. Moreover the majority of auditors believe that the local legislative framework is good as it stands and their responsibilities should not be extended. Conversely regulators feel that an extension in an auditor's responsibilities is necessary since such provision in law would enhance credibility in the auditing profession. Furthermore auditors believe that whistleblowing is driven by a number of factors which should be considered on a case by case basis. However, although auditors should act independently of their clients, independence is not seen as directly related to whistleblowing. Conclusions: The main conclusion of this study is that auditors believe that an extension of their reporting responsibilities could m Yet all other stakeholders should not be left unprotected. One of the key stakeholders, especially in public listed entities, is the public at large. For this reason it was concluded that auditors should report anything that could have repercussions on society as this is part of their moral responsibility, even though it is not a legal obligation. Value: Locally, this research seems to be the first to study external whistleblowing by auditors. Moreover there are some countries which have already considered including a general clause in their legislative framework which incorporates the auditors' duties to report externally. Hence it was interesting to examine Maltese auditors' perceptions on this issue and how local legislation could impose such duties on auditors.