“In their own words”…Actions – Whistleblow
In the following extract from the ICAS research publication “Speak up? Listen up? Whistleblow? In their own words – Insights into the ethical dilemmas of ICAS members” we hear from ICAS members about their real-life experiences of ethical challenges, “In their own words”.
"Being a Finance Manager, Controller, Director, it’s a lonely job sometimes. Yeah. I remember I met a banker in (company name deleted), and we socialised one day, and he said, ‘You’ve got quite a lonely job, haven’t you?’ And I actually hadn’t thought about it until then, and I thought about it and I thought, ‘You’re actually right’." (Extract from interview with Edward)
In contrast with cases where interviewees related their experiences of speaking up internally, as described in section 5.1, there were fewer instances of accountants reporting issues externally. Early on in his career while working at a small, family company owned by a father and son, Max had been in a situation where he contacted a potential funder to warn them about concerns he had about the financial statements that they had been given by owners of the company.
The funder “had actually been about to put a large amount of money into this company - and this was the first ethical problem I had because I knew they were going to lose it because I could see what this family were doing”. He had learned that the stock valuation figure had been provided by the father but had not been audited. In his opinion:
"the accounts were absolute rubbish, the stocks were massively inflated…the figures were absolutely amazing, which surprised me because I hadn’t prepared any accounts for that stage…And the father used to value all work in progress and stock, and that had been rising for three years. And their overdraft had been rising for three years almost in perfect parallel."
He felt confident about the fact that he had to act but decided to discuss the issue with “a fellow chartered accountant, a chap I admire a lot” who confirmed that he had to find a way of suggesting that the funder take “a second look” in a way that meant he would not actually disclose confidential information but would send a clear signal to the funder. Max decided to contact the potential funder and recounted what happened next as follows:
"So, I rang up the Financial Director of (the funder’s name deleted) and I said, “Look you have been given sets of accounts, I understand. All I can say to you is, I have only briefly looked at them. I have not had time to look at them in depth, but I do believe that you should question them. And you should look closely at the funding requirements that are now being met by the bank and that might or might not lead you to asking more questions. But I certainly think you should do a bit more research. And I think you have also got to understand that I think it is very unlikely that I am going to be here much longer, and I am the first qualified accountant to be in this firm, since it has started."
Max summed up his situation in the following terms: “The ethical thing was, did I say nothing, knowing that the claim was based on false information” For him, the matter was clear as the situation was “not acceptable” and “clear as a bell”. The funder did not provide the funds requested and the business went into receivership a few months later.
Max also approached the then Department of Trade and Industry (DTI) but had been rebuffed because the case was too small for them to take further action. Elliott had also approached the DTI and was interviewed about his concerns but no further action was taken by the DTI because the people Elliott was reporting had not gained personally from the transactions. Max and Elliott had both been disappointed with their outcomes, Elliott saying “I think there should have been at least some kind of enquiry”.
Matthew had made a number of reports throughout his career. Some were for criminal activity including fraud and a director acting in his personal interest. In one case, the person had gone to prison as a result. Sometimes however, he had suspicions of criminality, such as taking money from the work till and bribery overseas, but there was not always sufficient evidence to progress matters further. There were other cases where he had reported matters to banks but these were situations where he had the authority to speak to the banks, hence would not count as whistleblowing.
Logan had an advisory, non-executive type position at a charity. Having becoming aware of concerns about improper use of funds and conflicts of interest that were not being disclosed, he approached the relevant regulator, laying out his concerns in writing, and he was also interviewed by the regulator. To his disappointment, he found them to be “toothless” and that “support and their involvement was a total and utter waste of time”. He pointed out some factors that potential whistleblowers need to consider. First, it can be difficult to collect evidence because “when we look at some of the minutes of public organisations which are subject to freedom of information, they are very anodyne”. Therefore, he was glad that he had kept very detailed notes of meetings.
Second, he said that it can be difficult to find appropriate people close to the situation to consult because some have “not declared a conflict of interest” and others were “protecting their own reputations”. He had therefore consulted people in his network as they were removed from the situation.
Third, he had been surprised by the social media publicity for aspects of the case and commented that “it’s harder and harder now for people to make the decision to be a whistleblower because of the public persona, with the social media and all the rest of that stuff and all the trolls that would come at you”.
In a series of extracts from the research hear from ICAS members about the real-life situations they have faced - “In their own words”.
Hear more about the key findings from the author of the research Catriona Paisey, Professor of Accounting, University of Glasgow