Auditing and Accounting Whistleblowers FAQ

Auditors and accountants have more tools for reporting fraud than they may realize.

Q: Can auditors and accountants qualify as whistleblowers?

A: Yes, several U.S. laws - including the Internal Revenue Service (IRS) whistleblower law and the Dodd-Frank Act - allow auditors and accountants to qualify as whistleblowers, and the Sarbanes-Oxley Act protects auditing and accounting whistleblowers from retaliation.

Q: How can auditors or accountants report tax fraud?

A: Whistleblowers can report tax violations through the Internal Revenue Service (IRS) whistleblower law. Any individual who is able to obtain credible information concerning major tax fraud can file an IRS whistleblower claim, including outside contractors. Since 2007, the Whistleblower Office has collected over USD$5.7 billion and made awards in the amount of USD$931.7 million.

Q: When can internal auditors and other compliance officials report to the Securities and Exchange Commission (SEC)?

A: The Dodd-Frank Act allows whistleblowers to report securities fraud or violations of the Foreign Corrupt Practices Act (FCPA) through the SEC whistleblower program. While the SEC generally excludes external auditors and accountants from becoming whistleblowers, there are several key exceptions. Internal auditors and other compliance personnel may report to the SEC and qualify for awards under the program if:

• They have a reasonable basis to believe that disclosure of the information to the SEC is necessary to prevent the relevant entity from engaging in conduct that is likely to cause substantial injury to the financial interest or property of the entity or investors.

• They have a reasonable basis to believe that the relevant entity is engaging in conduct that will impede an investigation of misconduct.

• at least 120 days have passed either since they properly disclosed the information internally, or since they obtained the information under circumstances indicating that the entity’s officers already knew of the information.

Q: When can external auditors report to the Securities and Exchange Commission (SEC)??

A: The Dodd-Frank Act allows whistleblowers to report securities fraud or violations of the Foreign Corrupt Practices Act (FCPA) through the SEC whistleblower program. While the SEC generally excludes external auditors and accountants from becoming whistleblowers, there are several key exceptions. External auditors and accountants can become whistleblowers if:

• They have a reasonable basis to believe that disclosure of the information to the SEC concerning material violations is necessary to prevent the relevant entity from engaging in conduct that is likely to cause substantial injury to the financial interest or property of the entity or investors.

• They have a reasonable basis to believe that the relevant entity is engaging in conduct that will impede an investigation of misconduct related to material violations.

• They have informed a superior in their firm about improper or illegal activity by the client and the firm has failed to report this to the SEC.

Q: How can auditing and accounting whistleblowers protect their identity?

A: Whistleblowers can protect their identity by reporting confidentially or anonymously. Under the Dodd-Frank Act, whistleblowers can request that their identity be kept confidential or file a complaint anonymously. In order to be eligible for a reward, whistleblowers who wish to remain anonymous must file through counsel.

The IRS is also required to protect the confidentiality of whistleblowers to the fullest extent permitted under law. Whistleblowers should consult with an attorney about how to secure protections against retaliation.

Q: Can auditing and accounting whistleblowers qualify for financial rewards?

A: Whistleblowers can use powerful U.S. reward laws to report fraud and qualify for a financial reward.

Whistleblowers who provide original information to the Securities and Exchange Commission (SEC) that leads to a successful prosecution can receive between 10% and 30% of monetary sanctions that exceed USD$1 million.

Under the IRS whistleblower program, if there is a successful prosecution that meets the financial qualifications (over $2 million in taxes, penalties, and interest OR gross income over $200,000), the whistleblower will be entitled to an award of between 15 and 30 percent of the total amount collected by the government.

Q: Do auditors and accountants have to be U.S. citizens to use U.S. whistleblower laws?

A: Whistleblowers around the world can use U.S. whistleblower laws, regardless of citizenship. Whistleblowers can also report any company that violates U.S. federal securities laws or U.S. tax laws, regardless of the location of the company’s headquarters or operations.

Q: Have auditing, accounting, and other compliance professionals been successful as whistleblowers?

A: Yes, several whistleblowers have received substantial rewards for reporting tax and securities violations. In 2011, an accountant received a USD4.5 million reward under the IRS whistleblower program for information related to the employer’s USD20 million tax understatement. In 2014, an auditing whistleblower received an award of USD300,000 for disclosing wrongdoing after reporting it internally failed to convince management to act. In 2015, a compliance professional received an award of more than USD1 million for a disclosure after management was made aware of the impending harm to investors and failed to take steps to prevent it.

Q: Do other laws protect auditing and accounting whistleblowers?

A: Auditors and accountants are also protected from retaliation by the Sarbanes-Oxley Act, which provides protection for whistleblowers who report a violation of federal securities law, SEC rules, or any federal law related to fraud against shareholders. The law protects employees of publicly traded companies and contractors, subcontractors, and agencies of publicly traded companies, including auditors and accountants. If a whistleblower’s retaliation claims who prevails, they can be entitled to back pay, reinstatement, and special damages.

Q: How can I get help?

If you need additional help or want to contact an attorney, please fill out a confidential intake form. To learn more about how NWC assists whistleblowers, please visit our Find an Attorney page.

The New Whistleblower's Handbook: A Step-by-Step Guide to Doing What's Right and Protecting Yourself (Lyons Press, 2017) is the first-ever consumer's guide to whistleblowing. It contains clear and comprehensive rules that fully explain the how to effectively blow the whistle. It is very important that you review this resource in order to determine what laws may protect you and whether you need to take immediate action to protect your rights.

Please Read the FAQ Disclaimer.

The material in this FAQ may not reflect the most current legal developments. The content and interpretation of the law addressed herein is subject to revision. We disclaim all liability in respect to actions taken or not taken based on any or all the contents of this website or in this FAQ. Before acting on any information or material in this website, we strongly recommend you seek a qualified whistleblower attorney.

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