Auditors’ responses and whistleblowing allegations

Abstract

In this paper, I examine whether audit fees and auditors’ opinions on internal controls relate to peer firms’ whistleblowing allegations. This paper provides compelling evidence that whistleblowing allegations impact peer firms’ audit fees and auditors’ opinions on internal control effectiveness. More specifically, audit fees increase, and auditors issue more adverse opinions on internal controls after whistleblowing allegations. This effect is stronger when the peer firms have higher litigation risks and more internal control issues. Overall, this study provides new insights into how whistleblowing allegations can affect the audit process and audit fees.