Australian Law of Business Organizations Whistleblower Corporations Act 2001

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Whistleblower

A whistleblower is a person that reports any improper conduct that they may observe in their areas of responsibility. In the context of a corporation, it involves an employee reporting his or her colleague in case they find out that they are involved in actions that may prove disastrous to the company. There may be some negative practices that employees may be involved in which the management may not be aware of. An employee that observes such conduct may choose to report to the necessary authorities for an appropriate action to be taken (Australia, CCH Corporate Law editors, CCH Australia Limited, 2009). The action taken by the employee to report the incidence is called whistleblowing while the person reporting is called a whistleblower. Whistleblowing may either be external or internal depending on the authority that the whistleblower chooses to use. In most cases, employees will be encouraged to use internal whistle-blowing so that they dont cause a lot of attention to the external environment.

How the context of an audit may lead to a whistleblower coming forward

Company auditors are responsible for counterchecking all the financial reports that have been submitted for publication by the financial controllers of the company. They are usually viewed as the ultimate authority to approve the accounts before they are published in media for public view. Auditors have specialized skills to approve the transactions that have been made in the books and hence be able to question any transaction that appears wrong. Their signature is enough to tell the company and the public that the records are correct. There may however be instances when the auditors may collaborate with financial controllers to manipulate the records to show wrong reports. One notable instance of auditors that collaborate with the entire management of the company to give wrong information was that of Enron. The company had received a lot of credit from economic experts considering its faster growth. The concussion was made after looking at the financial reports of Enron that showed how fast it was growing. After it became clear that the company was not performing well and had to be shut down, its auditors Arthur Anderson were charged for acting against their employment ethics and helping the company to manipulate the accounts rather than exposing them.

Potential ethical issues that may arise for the auditor

An auditor is an overall determinant of how realistic the financial reports published for the public will be. Their judgment is never questioned as they are deemed to understand what they are doing better. Any small mistake that they make is culminated to be a lie to the public and especially the investors and potential investors of the company who rely on such reports. Auditors have special principles that they have to operate on which allows them to make necessary inquiries either from the company staff or fellow editors to ensure that what is published to the public is accurate. The ethical issues that may be charged against them if they provide wrong reports are for lying to both the company and the public (Kennedy & Richards, 2004). When such a case is recorded necessary investigations will be carried out and once found guilty they will be charged accordingly.

Potential legal issues that may arise for the auditor

An auditor that has been found guilty of the offense will be charged under the Australian law for breach of justice through the conducts that they have been involved in to manipulate such accounts. They will also face the risk of being discontinued from their auditing services as they have proved that they can not be trusted by the public. They will also be required to pay for all the inconveniences that they have caused to the public and the company by signing in to wrong financial reports. Depending on the level of their mistakes, various charges under the whistleblowers act will apply to them. If the auditors were reported by a whistleblower, then it will have to be identified whether the act was intentional or not.

The potential for conflict in the ethical and/or legal issues faced by auditors

The main point of conflict when it comes to auditors is the wider area of society that they cover and the fact that their issues are directly linked to financial investments. This is an area that will not only affect the company but also the other stakeholders that are affiliated with the company. When wrong information is displayed about the financial progress of a company, they display a certain kind of picture in the minds of an individual which affects their investment decision. Publishing wrong information implies that the auditor is playing games with the investments that have been made in the company by its stakeholders (Moye, 2004). This is the reason why stern measures are taken against their actions to not only protect the stakeholders but also the company. Audit reports enable the company and the public to make informed decisions about their investments.

Protection of the whistleblowers

Whistleblowing is not an easy responsibility considering the consequences that the concerned employees may be subjected to. Most people choose to keep quiet because they want to protect their jobs. When it comes to displaying the financial reports of a company, the management will never wish to display reports that will suggest to the public that they are not performing well (Vandekerckhove, 2006). When they discover that they have recorded a poor performance that is likely to scare investors away, they will collaborate with the auditors to enhance the reports. Depending on the agreements that are entered into by the auditor, they may agree to them and use all their financial skills to blindfold the public. Company employees are mainly relying on the services of their company for their growth which makes most of them suppress such information. They may clearly understand the harm that they are causing not only to themselves but also to the public. The harm they cause to themselves is that when the matter comes to light, they may also be liable to legal judgment for not revealing the scandal on time. They may also fear that if they report the scandal, the company may have fewer investors and customers and hence risk their career.

Employees may not be sure of the consequences that may befall them when they choose to report or suppress a scandal. This has hence raised the need for them to be granted necessary protection that will enable them to report the issues. The government of Australia realizes the risk that the employees are exposed to and the importance of them reporting such scandals to protect investors. Another risk that the whistleblowers may be exposed to is when they make a wrong assumption concerning the same. The court will not declare any judgment on an individual before carrying out the necessary investigation to prove the allegations. Most employees may suspect a scandal but not be bold enough to report the same because they are not sure about it. They may be afraid that legal action may be taken against them if the parties concerned are proved innocent by the court of law.

The Australian law on business organizations has put measures that will ensure that any suspect that is forwarded to them by a whistleblower is treated with secrecy until the necessary investigations are complete. The whistleblowers are assured that they will not be punished if the information is found to be invalid but credited for showing concern for the performance of the company. They are also assured that the information will not be revealed to people that are likely to frustrate them like their colleagues and employers. They are also assured of subsequent protection during and after the hearing of the cases in case their allegations are justified. The court will ensure that their career life is not affected by them choosing to stand for truth.

The potentially serious consequences of blowing the whistle

Blowing the whistle can have serious consequences on the career life of an employee as well as the company. All this will depend on how the case has been treated and the decision that will be taken by the court. An employee that will be suspected to have blown the whistle is at risk of losing his or her job or being left out in the rewarding procedures of the company (Yalden, 2008). If the company engaged in the activity knowingly to hide its financial progress may subject the whistleblower to serious torture. Most of them will be treated badly in secret so that they are not suspected. The whistleblowers may be accused of poor performance in the company and hence being denied salary increments and promotions. They may be given demotions or made to do more work than they are meant to do. They may be sidelined by their colleagues who may look at them as traitors than cannot be relied on.

Blowing the whistle may also have serious consequences on the management of the company or the auditors concerned. If they are reported in the court of law and found guilty, they may not only lose their jobs but will also be subject to pay high fines in form of compensation for the inconveniences caused to the various parties. The charges against the auditors and the company management will depend on how long they have been involved in the scandal (Gay, 2006). The Enron scandal was considered to be the biggest audit scandal that had been recorded at the time. It led to the closure of the company and the auditors. They were also required to pay large amounts of money in form of fines and compensation to the workers. The level of the scandal had reached an advanced stage that required an advanced hearing. There was no prior whistleblower of the company as the scandal was well coordinated. It came to light years after the scandal began which made most of the involved parties suffer serious court penalties.

Bibliography

Australia, CCH Corporate Law editors, CCH Australia Limited, (2009), Australian Corporations & Securities Legislation 2009: Corporations Act 2001, ASIC Act 2001, related regulations, Melbourne: CCH Australia Limited.

Gay, G, (2006), Auditing and Assurance Services in Australia. London: McGraw-Hill.

Kennedy, R, & Richards, J, (2004), Integrating human service law and practice, Oxford: Oxford University Press, Original from Indiana University.

Moye, J, (2004), The Law of Business Organizations, London: Cengage Learning.

Vandekerckhove, W, (2006), Whistleblowing and organizational social responsibility: a global assessment, New York: Ashgate Publishing, Ltd.

Yalden, R, (2008), Business organizations: principles, policies and practice, Melbourne: Montgomery Publication.

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