Image of IAF Report Underscores Importance of Whistleblower Rewards and Protections for Internal Auditors

IAF Report Underscores Importance of Whistleblower Rewards and Protections for Internal Auditors

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Pressure on Auditors to Suppress Audit Findings

A report from the Internal Audit Foundation reveals that 23% of internal auditors still experience pressure to suppress or significantly modify audit findings. The report is based on a survey of more than 14,500 audit professionals from 166 countries. Notably, an additional 11% of participants responded “prefer not to answer,” totaling a 34% “pressure score” for all participants.

In North America, internal auditors reported greater pressure than the global average, with 25% of participants indicating that they experienced substantial pressure to suppress or significantly modify audit findings. This statistic is particularly troublesome considering that new laws in the United States provide auditors with strong protections and incentives, including monetary awards, for reporting wrongdoing.

If you have suffered retaliation for whistleblowing, contact us to schedule a free preliminary consultation.

Whistleblower Protections for Auditors Under Sarbanes-Oxley and Dodd-Frank

The Sarbanes-Oxley Act (“SOX”) and the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) substantially protect auditors and accountants against retaliation for blowing the whistle on potentially illegal and/or unethical activities by their firms or clients of their firms. In March 2014, the Supreme Court clarified, in Lawson v. FMR LLC, that these protections also cover external auditors, i.e., “employees of contractors of public companies.”

Under SOX, auditors and accountants are protected against a broad range of retaliatory employment actions, including discharging, demoting, suspending, threatening, or harassing them, or in any manner discriminating against them. A SOX whistleblower who prevails on a retaliation claim may receive:

  • lost wages and benefits;
  • reinstatement; and
  • special damages, which include emotional distress, impairment of reputation, personal humiliation, and other non-economic harm resulting from retaliation.

In March 2014, a jury awarded $6 million to a whistleblower in a SOX retaliation case.

Auditors and accountants are also protected against retaliation under Dodd-Frank for disclosing fraud to the SEC. While very similar to SOX’s whistleblower provision, Dodd-Frank offers slightly different remedies, including double back pay, and encompasses a broader range of protected activity, such as making disclosures that are required or protected under SOX, the Securities Exchange Act of 1934, or any other law, rule, or regulation subject to the jurisdiction of the SEC.

Click here to learn more about damages or remedies in whistleblower retaliation cases.

Monetary Awards for Reporting Violations of Securities Laws

Auditors and accountants may also receive monetary awards for exposing wrongdoing. In 2010, Dodd-Frank created the SEC Whistleblower Program, which provides rewards to whistleblowers who report violations of the federal securities laws to the SEC. Eligible whistleblowers are entitled to an award of between 10% and 30% of the monetary sanctions collected in actions brought by the SEC or in related actions brought by other regulatory or law enforcement authorities.

To be eligible for an award, auditors must fulfill certain requirements. Dodd-Frank provides that an auditor or accountant, whether internal or external, may disclose information to the SEC and be eligible for an award if:

  • the auditor has a reasonable basis to believe that disclosure of the information to the SEC is necessary to prevent a client from engaging in conduct likely to substantially injure a financial interest of the entity or its investors;
  • the individual has a reasonable basis to believe that the relevant entity is engaging in conduct to obstruct an internal or SEC investigation; or
  • at least 120 days have elapsed since the auditor (a) provided the information to the relevant entity’s audit committee, chief legal officer, chief compliance officer (or their equivalents), or supervisor; or (b) received the information, if the auditor received it under circumstances indicating that the entity’s audit committee, chief legal officer, chief compliance officer, or supervisor was already aware of the information.

The law permits whistleblowers who are represented by attorneys to remain anonymous when reporting pursuant to the SEC Whistleblower Program.

In August 2014, an audit-and-compliance employee received an award of more than $300,000 for reporting wrongdoing. More recently, in August 2016, a former Monsanto executive received an award of more than $22 million for exposing weaknesses in the company’s internal accounting controls. This award demonstrates how auditors are in an ideal position to identify and report fraud.

Attorneys Combating Whistleblower Retaliation Against Auditors

A large portion of auditors experiences pressure to suppress or modify audit findings. Fortunately, SOX provides strong protection against retaliation, and Dodd-Frank’s whistleblower bounty provision offers a strong incentive for auditors and accountants to uncover wrongdoing, protect investors, and obtain considerable compensation for doing the right thing.

Experienced SEC Whistleblower Attorneys

 

The experienced whistleblower lawyers at Zuckerman Law represent whistleblowers worldwide before the SEC under the Dodd-Frank SEC Whistleblower Program.  The firm has a licensed Certified Public Accountant and Certified Fraud Examiner on staff to enhance its ability to investigate and disclose complex financial fraud to the SEC, and two of the firm’s attorneys served on the Department of Labor’s Whistleblower Protection Advisory Committee and in senior leadership positions at a government agency that protects whistleblowers.

Firm Principal Jason Zuckerman has been named by Washingtonian Magazine as a “Top Whistleblower Lawyer” and the firm has been ranked by U.S. News as a Tier 1 Firm in Labor & Employment Litigation.

 

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To learn more about the SEC Whistleblower Program, download Zuckerman Law’s eBook: SEC Whistleblower Program: Tips from SEC Whistleblower Attorneys to Maximize an SEC Whistleblower Award:

SEC Whistleblower Program Tips from SEC Whistleblower Attorneys to Maximize an SEC Whistleblower Award

 

 

For more information about whistleblower protections and rewards, contact the whistleblower lawyers at Zuckerman Law at 202-262-8959.

 

Sarbanes-Oxley Protection for Corporate Whistleblowers

The whistleblower protection provision of the Sarbanes-Oxley Act provides robust protection to corporate whistleblowers, and indeed some SOX whistleblowers have achieved substantial recoveries.

The SOX whistleblower lawyers at leading whistleblower law firm Zuckerman Law released a free guide to the SOX whistleblower protection law: Sarbanes-Oxley Whistleblower Protection: Robust Protection for Corporate Whistleblowers.  The guide summarizes SOX whistleblower protections and offers concrete tips for corporate whistleblowers based on lessons learned during years of litigating SOX whistleblower cases.

The goal of the guide is to arm corporate whistleblowers with the knowledge to effectively combat whistleblower retaliation, avoid the pitfalls that can weaken a SOX whistleblower case, and formulate an effective strategy to obtain the maximum recovery.

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Categories: Auditor Whistleblower Protection, Corporate Whistleblower, Sarbanes-Oxley Whistleblower, SEC Whistleblower Program

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About the authors

Avatar of Jason Zuckerman

Jason Zuckerman, Principal of Zuckerman Law, litigates whistleblower retaliation, qui tam, wrongful discharge, and other employment-related claims. He is rated 10 out of 10 by Avvo, was recognized by Washingtonian magazine as a “Top Whistleblower Lawyer” in 2015 and selected by his peers to be included in The Best Lawyers in America® and in SuperLawyers.

Avatar of Matthew Stock

Matthew Stock is the Director of the Whistleblower Rewards Practice at Zuckerman Law. He represents whistleblowers around the world in SEC, CFTC and IRS whistleblower claims. He is also a Certified Public Accountant, Certified Fraud Examiner and former KPMG external auditor.