The current issue and full text archive of this journal is available on Emerald Insight at:

www.emeraldinsight.com/1832-5912.htm

JAOC
15,4 Walking the talk
Enacted ethical climates as psychological
contract venues for potential whistleblowers
Andrea M. Scheetz
654 School of Accountancy, Georgia Southern University, Statesboro,
Georgia, USA, and
Received 4 June 2018
Revised 15 February 2019
Accepted 15 April 2019 Timothy J. Fogarty
Department of Accounting, Case Western Reserve University, Cleveland,
Ohio, USA

Abstract
Purpose – Based on exchange theory and the generalized norm of reciprocity, psychological contracts
perceived by employees are believed to have dysfunctional consequences for organizations if breached. This
paper aims to study the willingness of employees to report fraud, as such is an important aspect of internal
control for organizations.
Design/methodology/approach – A 2
2 between-subjects experiment was conducted in which 99
participants with diverse accounting backgrounds were first asked questions about their preconceived beliefs
(psychological contract) regarding how reports of unethical conduct would be managed, and their reaction if
these beliefs were broken (psychological contract violation). Participants were given a hypothetical situation
of fraud and then asked to indicate their likelihood of reporting fraud to a supervisor.
Findings – The main hypotheses are that employees will be less likely to report fraud when the
organization fails to signal the presence of a positive ethical environment or when management reacts weakly
to previous reports of unethical activity. The data and findings support these hypotheses. Additional testing
also reveals that a psychological contract violation mediates the relationship between the outcome of previous
reports and the intention to report fraud.
Research limitations/implications – As with any experimental study, this study’s results come with
limitations. Reading an overly simplistic scenario that omits real world details and providing intention to
report is very different from actually reporting fraud in one’s own place of employment. Therefore, reporting
intentions may vary from actual reporting behavior. Further, reporting motivation (self-defense, altruism, etc.)
and concern over retaliation are not measured.
Practical implications – Employees have expectations surrounding ethical corporate environments.
Psychological contract violations occur as a result of broken expectations and are common in the workforce.
In this study, a breakdown in the internal control environment because of a poor ethical culture, caused an
even greater breakdown in internal controls because of employees’ decreased reporting intentions.
Social implications – Psychological contract violations impact employees’ intention to report fraud.
These violations need to be understood so that additional measures and safeguards can be instituted when
employees are not acting as a fraud defense or detection mechanism. During such times when there is a
breakdown in this type of internal control (that is, when employees might be hesitant to report fraud), extra
safeguards against fraud, additional procedures to detect fraud, and enhanced employee training encouraging
reporting of suspected unethical conduct, become even more important.
Originality/value – Strong experimental methods provide a rigorous way to evaluate a problem of our
day: job insecurity caused by rampant organizational turbulence. The hidden cost is expressed in terms of
Journal of Accounting &
how less can be expected of employees as a first line of defense against fraud.
Organizational Change
Vol. 15 No. 4, 2019 Keywords Job insecurity, Whistleblowing, Organizational change, Psychological contract, Ethics,
pp. 654-677
© Emerald Publishing Limited
fraud, Reporting intentions
1832-5912
DOI 10.1108/JAOC-06-2018-0047 Paper type Research paper
1. Introduction Enacted
Notwithstanding sustained efforts of criminalization, detection and punishment, economic ethical
crime is rampant, and increasing. In the USA, over half of all companies report falling victim
to fraud (PwC, 2018; ACFE, 2018; Kroll, 2018). With most frauds occurring in the form of the
climates
misappropriation of assets, companies worldwide grow increasingly reliant upon
whistleblowers for detection (ACFE, 2018).
Fraud’s continuation as a major corporate problem could seem ironic in the context of
increased attention to internal control in recent years (COSO, 2013; PCAOB, 2007; AICPA, 655
2002). Assets should be safeguarded in ways that make their unplanned departure much
less likely. Companies have internal audit functions that are tasked with ensuring such
controls are working. Nonetheless, fraudsters find ways to defeat or bypass official controls.
In such a world, all employees have to be on guard for the good of the company and
essentially act as an informal additional internal control against fraud.
Just about every organization encourages its employees to be “eyes and ears” on the
ground against those that would misdirect company resources. However, such suggestions
and policies are mostly ineffective (Jensen et al., 2010). Reporting fraud apparently is highly
problematic, leading to regret for both those that do and do not (Fredin, 2012). The
willingness to report fraud cannot be assumed, but instead is dependent upon a large set of
situational and individual factors (Jones and Kavanagh, 1996).
To a large extent, our appreciation of fraud has been limited by the “fraud triangle”
(Cressey, 1973). Fraud resulted from the confluence of opportunity to commit the act, a
motivation to do such, and an ability to rationalize such behavior. Research that focuses
upon those that observe fraud committed by others tends to accept the idea that the desire to
steal cannot be eradicated. However, increased vigilance by honest others can reduce the
fraudster’s opportunities. At the same time, we need to understand the rationalizations in
play by those that see fraud but choose not to report it.
Based on exchange theory, the psychological contract between employees and their
organization provides a template to appreciate the behavior of putative reports of fraud. To
date, very little is known about how an employee’s psychological contract may impact their
likelihood of reporting fraud. A psychological contract is an individual’s beliefs about the
terms and conditions of a reciprocal exchange agreement between themselves and another
party (such as the organization), where a promise has been made and consideration offered
(Rousseau, 1989, 2001). However, these contracts are imperfect because they are based on
beliefs that are often not formally written or communicated, and the consideration may be
implied, making the contract easier to break.
A psychological contract violation (PCV) occurs when an individual perceives that the
other party has not fulfilled their obligations (Morrison and Robinson, 1997; Coyle-Shapiro,
2002). These unmet expectations may cause a psychological contract violation and can
result in a variety of negative feelings and ultimately impact both in-role and extra-role
performance (Morrison and Robinson, 1997; Turnley and Feldman, 2000). Extra-role
behaviors are the organizational citizenship acts that employees engage in which are not
explicitly required as part of their job responsibilities, but are instead discretionary and not
typically rewarded (Organ, 1988; Coyle-Shapiro, 2002). As whistleblowing is an extra-role or
organization citizenship behavior, it may be negatively affected by the occurrence of a PCV.
This study examines how psychological contract violations impact employee intentions
of internally reporting fraud using a 2
2 between-subjects experimental design.
Participants (99) with diverse accounting backgrounds (staff accountants to senior
executives) respond to a scenario in which fraud is discovered. In this experiment, a
psychological contract violation is provoked through a negative control environment using
JAOC poor responses to previous reports of unethical conduct and an overall unethical climate.
15,4 Outcome of previous reports of misconduct and organizational ethical climate are both
manipulated as being either negative or positive, to allow for the comparison of the
occurrence of a PCV to no PCV. Employees expect reports of misconduct to be handled
appropriately, and when such reports are not, a PCV results. Similarly, employees anticipate
organizations will have and promote a positive ethical climate, and when this is not true, a
656 PCV could be the interpreted consequence.
The experimental results indicate that employees do have preconceived beliefs
amounting to a psychological contract, regarding how they expect reports of unethical
conduct to be managed as well as what type of ethical environment the organization should
maintain. When these beliefs are violated, fraud reporting intentions to the supervisor
significantly decrease. Further, the occurrence of a psychological contract violation mediates
the relationship between outcome of previous reports and the intention to report fraud.
This study contributes to the whistleblowing, fraud triangle, and audit literatures by
demonstrating the negative consequences of psychological contract violations to the
organization. A PCV significantly decreases the intention to report fraud. Psychological
contract violations in organization employees may be hindering fraud reporting, thereby
enhancing the salience of the opportunity leg of the fraud triangle. Organization
management relies on employees to act as a defense against fraud and as a mechanism to
detect and report fraud. Vigilant employees can help to deter, detect, and report fraud,
weakening a fraudster’s opportunity. Management and auditors also need to be aware of
when it is likely that a situation has occurred which may have provoked a PCV in company
employees. Once alerted that a situation has occurred that may have caused a PCV,
management can then begin to take steps to repair the employees’ psychological contract
and to mitigate the chance that future frauds will go undetected.
The paper consists of five subsequent sections. Section 2 provides a literature review
mostly related to psychological contracts. Section 3 articulates the hypotheses that are
grounded in that literature. Section 4 describes the methodology for the collection of data to
test the hypotheses. Sections 5 and 6 summarize the findings and discusses both their
implications and limitations, respectively.

2. Theory and literature review

Building on the standard sociological premise that behavior is normatively based, Gouldner
(1960) formally articulated the norm of reciprocity as a fundamental building block of
relationships. He reasoned that the repayment of others was a universal component of moral
codes, seen by most as a duty to others and, on a macro-scale, that which allows for a stable
society. Subsequently, reciprocity became the essence of exchange theory (Homans, 1958),
which has been used by many to explain human relationships. This thinking was further
developed by Blau (1964) and Adams (1965) to incorporate planned investments made in the
expectation of interpersonal rewards. Thus, reciprocity promoted a rough calculus of
exchange that allowed trust to form (Butler, 1991). In the context of long-term employment,
the theory suggested that good employer treatment of employees would provoke
extraordinary levels of employee service to the employer. (Coyle-Shapiro et al., 2004). The
extent to which these norms were embraced and their origins are empirical questions (Izraeli
and Jaffe, 1998).
Argyris (1960) is believed to have coined the phrase “psychological contract” to apply
exchange theory to the workplace. Notwithstanding those relatively few expectations
recognized by law, employees come to anticipate certain benefits and considerations from
the organizations that employ them. The psychological contract suggests that the services
and other behaviors forthcoming from the employee have to be continually balanced by the Enacted
delivery of valued compensations of many different kinds by the organization. ethical
The mutuality of the psychological contract belies its implied and quite subjective
nature. In accordance with its name, the psychological contract exists in the mind of the
climates
employee and has not been formally agreed upon by the organization. In fact, discrepancies
about its terms should be anticipated (Sherman and Morley, 2015) and organizations’ views
about its elements are only infrequently heard (Guest and Conway, 2002). Its power exists as
a stable mental model that filters the reception of new information by the employee 657
(Rousseau, 2001).
Psychological contracts are usually sourced in the early socialization experiences of
workers. Kotter (1973) suggests that the outlines of this contract are critical to the “joining
up” process, as both employee and employer explore their fit. Early experiences with the
company, tempered perhaps by previous employment experiences, are critical (Rousseau,
2001). The employee adjusts expectations to a discovered reality, as well as to their self-
conceptions of ability to perform for the organization (De Vos et al., 2003).
Within the psychological contract, employees are believed to distinguish employee
inducements from subsequently assumed obligations, with the former of greater
consequence (Coyle-Shapiro and Conway, 2005). Although most writers agree that terms of
the contract must be based on employer promises, how specific those promises need to be is
debatable (Robinson, 1996). For example, that services have to be provided for wages is
clear, but the extent to which loyalty is implied by the provision of services is not (Coyle-
Shapiro, 2002). Over time, jobs tend to enlarge, making that which was extra-role into
internal-role (Coyle-Shapiro et al., 2004).
Psychological contracts become particularly interesting to researchers when they are
breached. These violations are generally defined as the non-fulfillment of an obligation owed
by the organization as perceived by the employee (Morrison and Robinson, 1997) or by the
discrepancy between organizational promise and organizational delivery (Coyle-Shapiro,
2002). These situations are commonplace, reported by a majority of all workers (Robinson
and Rousseau, 1994) and are made more likely if the organization experiences significant
external pressure (Coyle-Shapiro and Kessler, 2000). Robinson and Morrison (2000) find that
the likelihood of perceived contract violation to be correlated with inadequate socialization.
Trust serves as an important mechanism that both creates and gives expression to
violations of psychological contracts. How much trust an employee is willing to vest in an
employee relationship is not constant (Butler, 1991). Employees who trust their employers
more tend to show large and more severe reactions upon psychological contract breach
(Coyle-Shapiro, 2002) but are also less likely to perceive the occurrence of breaches
(Robinson and Rousseau, 1994). The loss of trust is perceived as a betrayal that gives import
to the breach (Turnley and Feldman, 2000), or as the impetus for feelings of loss that
challenge one’s sense-making (Morrison and Robinson, 1997).
Violations in and of themselves are not much interest. How employees react to those
situations are the usual object of attention. As an effort to essentially re-balance the
exchange with the employer, the employee predictably reduces their contribution to the
pursuit of employers’ goals, perhaps as simply as reducing their overall effort (Rayton and
Yalabik, 2014; Robinson et al., 1994). The employee loses commitment perhaps to the point
of engaging in various withdrawal behaviors (Guest, 1998; Coyle-Shapiro and Kessler, 2000).
Some studies have sought to differentiate the employee’s reaction to psychological
contract violations. If we should expect that the reaction will reflect the intensity of the
violated assumption (Guest, 1998), a range of possibilities exist. Typically, the literature has
contented itself with a cataloguing of the distancing and de-identification of the individual
JAOC from the organization (Zagenczyk et al., 2013). This follows the predictable pathway through
15,4 diminished levels of job satisfaction and organizational commitment, and may include
elevated turnover intentions. Some studies have been more specific, perhaps by
distinguishing in-role and extra-role behaviors. The general consensus is that the former is
most at risk but the latter is not immune (Turnley and Feldman, 2000). The high emotional
states sometimes involved (Morrison and Robinson, 1997) suggest that contra-productive
658 behavior may go further, perhaps into criminal and deviant zones (Fayyazi and Aslani,
2015). However, employees wishing to “get even” with organizations has to be an infrequent
case (Turnley and Feldman, 1999). Researchers should bear in mind that reactions to the
same PCV are not homogeneous. Whereas many are willing to choose a difficult-to-detect
passive strategy, an active one creates other considerations for the organization.
Several writers have observed the conceptual overlap between psychological contracts
and organizational citizenship behavior (Coyle-Shapiro, 2002). Organ (1997) defines these
behaviors to be strictly voluntary acts that transcend role expectations and could not be
enforced by the organization, but benefit the organization in material ways. These acts
produce more job satisfaction for employees than do regular work accomplishments (Organ
and Ryan, 1995). Whereas the organizational citizenship literature seeks antecedents for
such extra-ordinary acts, psychological contract violations may result in their absence. In
general, such breaches produce negative emotional states not conducive to generous
behavior (Suazo and Stone-Romero, 2011). More specifically, psychological contract
violations erode one’s tendencies toward civic virtue (Robinson and Morrison, 1995). When
employees are inclined toward withdrawal, the disinclination to protect the organization will
also show in reduced enthusiasm for group-based effort (Podsakoff et al., 1997).
Without subscribing to the magical power of organizational leadership (Meindl et al.,
1985), some writers have offered these attributes to our understanding of psychological
contracts. An unstated premise here might be the extent to which leaders personify
organizational culture (Victor and Cullen, 1988). Dulac et al. (2008) finds that the quality of
leadership exchange reduces the tendency of breaches to have adverse consequences.
Furthermore, the quality of relationship with a leader reduces the tendency for workers to
even perceive the existence of breaches (Suazo et al., 2008). These results are mitigated only
somewhat by the Mayer et al. (2013) finding that leadership can be an additive influence
toward satisfactory coworker relationships.
No behavioral area of study would be complete without the search for individual-based
differences. Without question, an intuitive case exists that the reaction to broken workplace
expectations might reside in personality or socialization differences. Several researchers
have identified the relevance of locus of control (Miceli et al., 2008). Taking a different tact,
Zagenczyk et al. (2013) suggest the unique reactions of those with Machiavellian tendencies.
However, other researchers suggest that personality differences are minor in their
explanatory power (Jensen et al., 2010; Ahmed et al., 2012). The general consensus supports
the conclusion that men and women are likely to react differently to a contract violation.
This finding follows the same logic and direction as many whistleblowing studies (Seifert
et al., 2010; Bernardi and Guptill, 2008).
Although the idea of psychological contracts did not develop in the accounting literature,
many studies in this field are consistent with and supportive of it, as it is applied to the
domains problematized by this paper. This field is generalized well by Reiss Nitkin (2012)
who asserts that relatively stable governance cultures exist for businesses. Within this field,
the encouragement of ethical behavior presents a priority challenge (Koumbiadis, 2014) with
others pointing to several sociological dimensions of deviance (Ramamoorti, 2008). This ties
together a few studies on the general nature of trust in accounting (Chong and Law, 2016;
Nitzi, 2017) with more specific attention given to whistleblowers (Erkmen et al., 2014). Quite Enacted
appropriately, some authors focus our attention on organizational justice (Rae and ethical
Subramaniam, 2008) and dynamic environments (Davis and Pesch, 2013), both of which
conditions have reciprocal and comparative aspects similar to psychological contracts.
climates
The accounting literature has consistently nominated “tone at the top” as a key factor
that would moderate the extent of fraud (Rezaee, 2005; Hogan et al., 2008; Trompeter et al.,
2012). The notion that organizations are well advised to assert ethical propriety permeates
the practitioner literature (Castellano and Lightle, 2005) and the international literature 659
(Law, 2011) in accounting. Although a disproportionate amount of this work is focused upon
its auditing implications (Wang and Fargher, 2017; Schmidt, 2014), studies are beginning to
observe that words and policies themselves are insufficient (Pickerd et al., 2015). However,
the accounting literature leans heavily upon how ethical ideas need to be embedded in
internal controls or reinforced by regulation (Rae and Subramaniam, 2008; Rezaee, 2005).
In sum, the idea of the psychological contract appears to be a good framework for the
study of the employment relationship. First, it is solidly grounded in established theory.
Second, psychological contracts have a basis in the micro-level of interaction but possess
clear implications for higher levels of analysis. One should not forget however that any
template based on perceptions of fairness will be highly dependent upon the specific context
that is created.

3. Hypothesis development
Many specific elements of the psychological contract could have been selected for research
attention. We sought one that could be influenced by both individualistic and situational
circumstances. We also preferred a corporate performance that was important to the entity
but extra-role for the individual. We thought it important to find some issue that bore upon
corporate culture, since that is highly relevant to what the entity purports to be (Reidenbach
and Robin, 1991).
Recognizing that upper management of a company establishes and validates a certain
ethical culture has been often referred to as “tone at the top” (Soltani, 2014). These
pronouncements contain explicit value statements that bear upon what should work and
pattern many outcome preferences (Reidenbach and Robin, 1991). The literature clearly
establishes the potential impact upon individual employees (Ford and Richardson, 1994;
Martin and Cullen, 2006). In general terms, the establishment of different types of ethical
climates can increase or decrease employee commitment (Cullen et al., 2003). Ethical
positioning done by those at the apex of the firm represents purposeful behavior that
strategizes what is best for the organization in the long run (Schwartz et al., 2005).
Individuals who observe efforts by the company to take the proverbial “high road” when
confronting difficult conflicts should understand the intention to have them fall into line.
Despite the fact that employees usually have no direct contract with these policymakers,
psychological contracts are being forged (Miller and Thomas, 2005; Grimmer and Oddy,
2007). Individuals are being told in essence, that ethical action will be rewarded and
unethical action will not be tolerated (Chen et al., 1997). At its furthest reaches ethical
behavior includes the willingness to report the deviance of others (Kaptein, 2011). In sum,
the whistleblowing literature (Miceli and Near, 1988; Berry, 2004) can be folded into
psychological contract terms.
Whistleblowing provides an interesting, if not ideal application for observation of
psychological contract ideas. In that reporting the deviance of others has to be taken as an
action desired by the organization, and supportive of organizational well-being, we possess
an opportunity to see a higher than usual ethical level. Rather than merely doing no harm in
JAOC the absence of a breach in the psychological contract, we wonder if positive ethical
15,4 messaging can essentially bring forth a level of behavior beyond normal expectations. Here,
we expect that employees would prefer to work for organizations that behaved responsibly
and proactively. But whether this tone affects individual behavior is mostly untested in
psychological contract terms.
Very few employees work for criminal enterprises. Very few organizations broadcast
660 their intention to be low ethics actors. Therefore, we contrast companies that make strong
efforts to establish their high ethical posture with those that do not. This situation raises the
prospect that the failure to establish oneself as an ethical organization might be more
noteworthy than those that at least try. The absence of ethical signaling might serve as a
very subtle contract violation if individuals have come to value and expect very positive
organizational ethics profiles. In other words, saying the right things may be part of an
institutionalized environment where emulation is the rule (DiMaggio and Powell, 1983).
H1 therefore tests the consequences of “talking” the ethics talk that individuals may
expect. We cannot predict whether employees will embrace the idea that the organization’s
preferred position applies to them. Many employees adopt an “us” versus “them” attitude
about their organizations, and cannot be expected to fall into step if the matter is perceived
as outside their job description. Moreover, employees may discount such noble expressions
as merely conforming to societal expectations (Meyer and Rowan, 1977) and probably
lacking substance. Therefore, the following comprises the first empirical question:

H1. Individuals will be less likely to report fraud when the organization fails to signal
the presence of a positive ethical environment than when it does signal the presence
of a positive ethical environment.
The translation of ethical intention into consistent ethical action presents other empirical
questions. Some writers have studied various forms of role modeling by boards of directors
and other leaders (Soltani, 2014) perhaps through its own behavioral codes (Schwartz et al.,
2005). Perhaps more importantly, those who observe the “talk” of ethics, are expecting to see
consistent enforcement of those directives. Observing certain results could be characterized
as the “walk” of the ethical positioning discussed above.
The connection between policy and action is often assumed without overt manipulation.
Some define that which is “effective” with that results in action (Near and Miceli, 1995). To
expect that the organization means what it says is more intuitive than to believe that it does
not. Others however have put this expectation to a test. For example, Taylor and Curtis
(2013) measured the extent to which internal auditors believed that findings would be
followed by actions. Similarly, Greenbaum et al. (2015) tried to capture undesirable leader
hypocrisy.
Ethics may be a particularly susceptible area for “talk-walk” discrepancies. As noted by
McCuddy et al. (1993), ethical codes require strong support structures to have power and
effect. That a penalty exists for deviants evokes a sense of distributive justice (Seifert et al.,
2010). When individuals are asked to report the bad behavior of others, resultant
consequences for those misfeasors and other corrective organizational actions is conceived
as a benefit for the reporter that needs to outweigh costs (Zhang et al., 2013; Mayer et al.,
2013). Reports of this nature that do not result in such action feed the general pessimism
reported by Near et al. (2004). Without doubt, such a disconnect will deter the same
employee from making similar reports in the future (Mesmer-Magnus and Viswesvaran,
2005; Curtis and Williams, 2014). However, such an effect was not found by Kaplan et al.
(2016).
 For employees reporting fraud and other undesirable acts, the organization should be Enacted
very grateful. Although one could characterize this behavior as the implicit job of all ethical
employees, its empirical frequency suggests that employees see it as an extra-role event. An
example of outstanding organizational citizenship, reporting fraud exists on the precarious
climates
margin in psychological contract terms. As individuals rarely experience any loss or penalty
for failing to report, individuals who perceive psychological contract violations may be
easily discouraged from reporting. Just as individuals might not believe the “talk” of the
organization being ethical, they also might not take the organization’s past actions as 661
indicative of its normative positions. Just as fraud has unique dimensions, so does
organizational response to it. If organizations weigh the cost and benefits of actions,
different resolutions are possible, if not likely. Without a full disclosure, differing details of
past cases render official reactions in the present hard to predict. The treatment of past cases
certainly creates no guarantees for employees that are invited to take chances when a
validating organizational response is not mandated. This supports the need for a second
hypothesis:

H2. Individuals will be less likely to report fraud when management has failed to
forcefully respond to previously reported similar acts than when it has forcefully
responded to previously reported similar acts.
Many perspectives combine that would have us depart form the belief that the judgments
made on fraud reporting are linear or monotonic. Many writers including Zhang et al. (2013)
conjure the whistleblower as performing a cost/benefit analysis. Such interesting balancing
suggest multiple factors simultaneously in consideration. Wimbush and Shepard (1994)
make this more specific by pinpointing the potential combination of general ethical climate
and the demands of an immediate supervisor. Such conflict also is implicit in the hypocrisy
concept developed by Greenbaum et al. (2015). As heavily interaction-oriented as fraud
reporting is, there should be no surprise that its outcome lacks normative consensus (Near
and Miceli, 1987).
Employees know that talk is cheap and that management always possesses incentives to
say the “politically correct” thing whether or not such is meant. Sometimes what looks like
inconsistencies to outsiders like employees is a legitimate response to exceptional
circumstances. However, for sensitive areas such as fraud, with no shortage of criminal
overtones, full communication of these idiosyncrasies is often not possible. Employees are
left with the impression that the organization never intended to do what it said it would.
Pursuing one’s values involves high costs and difficult interactions that, when pushed,
many would prefer to avoid.
Despite the intuition that the ethical climate that is espoused must also be consistently
enacted for employees to believe that organizations are serious, untested empirical questions
exist. When “talk” and “walk” are in the same positive direction, how much more credibility
exists than can be obtained with the less expensive “talk” alone? If employees tend to believe
what they are told about organizational ethical intentions, seeing it come true should have
no information content. On the other hand, employees may seriously discount the
importance of a high-minded “tone at the top” when they fail to see it materialize in
consistent consequences for good and bad behaviors. We also puzzle over the company that
does the “right thing” without the advance ideology that so many others wish to take credit
for. Would such a firm be rewarded for its simple justice approach, or would employees
believe that without enough policy statements, the company might not be able to sustain
such good conduct? Without question, the nexus between ethical intentions and ethical
actions can be formulated as an interaction hypothesis.
JAOC H3. Observations of management’s response to past reports and ethical environment
15,4 signaling will interact such that a diligent response from management to past
reports of unethical behavior will strengthen fraud reporting intentions in
environments where proactive signaling is absent to a greater extent than when
proactive signaling is present.

662
The hypotheses are grounded in rather ambitious aspects of exchange theory. Without
direct benefits coming to the person who observes fraud, the reciprocity that might be
trigged (or not triggered) by purported ethical pronouncements and consistent reactive
behaviors is a generalized one. The exchange that may be occurring is based upon the
common benefits that the observing individual would have to see existing in shared moral
norms (Cropanzano and Mitchell, 2005; Sak, 2006). The observer is witnessing the first step,
whereas the organization positions itself regarding ethical behavior invites the individual
toward a similar plateau accomplishable only by virtue of that person reporting fraud.
In sum, this paper has made some assumptions in the selection of hypotheses to test.
Most notably, the importance of organizational values as announced, and as materialized in
action upon individuals, are asserted. This premise evokes various tensions for the
individual that balance the power distance between those that manage the organization
against the interactions that such a person is likely to have with other similarly situated
organizational members. When circumstances suggest that loyalty to the organization may
create lower harmony with other employees, the power of the psychological contract is put
at issue (Larmer, 1992; Grimmer and Oddy, 2007).

4. Research methodology
4.1 Design
The experiment uses a 2
2 between-subjects design to investigate the effect of a
psychological contract violation on the internal reporting of fraud. The between subjects
factors (independent variables) are outcome of previous reports of corporate behavior
(strong or weak company response) and organization ethical environment (positive or
neutral). The dependent outcome variable is the intention to report to a supervisor.

4.2 Task
Participants were given an experimental instrument describing the innovative bicycle
company (IBC), a hypothetical developer, manufacturer and seller of cutting-edge bicycles
and related accessories. Background information about the company indicated that the
company has a code of business conduct and an ethics policy, which employees are required
to sign on their first day of employment. The next portion of the instrument described the
company’s ethical environment (discussed below under Variables). This was followed by
information about Taylor, and Taylor’s co-worker Sam, both senior accountants and CPAs.
The participants next read a scenario in which Taylor discovers that Sam is engaging in a
check cashing scheme, in which Sam stole nearly $10,000 in just the previous month. Sam
appears to be taking the checks made out to “IBC” and depositing them into an alternative
account under his control with the name “Irresistible Bike Co.” The narrative concludes with
how the company has responded to previous reports made by employees of unethical
conduct (also discussed below in the Variables section).
After reading the scenario, participants responded to a series of questions designed to
measure their likelihood of reporting the fraud. Participants also respond to manipulation
check questions, questions about the ease of the case and the morality of the unethical act,
and a psychological contract violation measure. The instrument then concludes with Enacted
demographic questions. ethical
climates
4.3 Variables
The independent variables are organizational ethical climate and outcome of previous
reports. Organizational ethical climate was manipulated between participants. Two levels
represent relatively positive and negative ethical climates. To help develop the scenarios,
research was conducted to determine the factors that contribute to an ethical environment
663
(Sims and Brinkman, 2003; Ruiz-Palomino and Martinez-Canas, 2011; Murphy et al., 2012.).
In addition, corporate materials were consulted to determine how organizations maintain
strong, positive, ethical environments. Under the positive ethics manipulation, the company
was described as not only having and enforcing an ethics policy, but required yearly ethics
training, and using ethical adherence as a factor in employee performance review. Under the
negative ethics manipulation, the company was described as having an ethics policy but not
adhering to it. Here the manipulation also described a highly competitive, results-at-any-cost
environment that cast doubts on top management’s honesty and integrity (e.g. aggressive
earnings management). Outcome of previous reports of unethical conduct was also
manipulated between participants. Two levels represent a relatively strong and weak
response to reports of unethical conduct. Under the strong response condition, the company
was described as having a formal process to deal with such reports. The company also was
given a history of swift action which had included disciplinary action and employee
dismissal. Under the weak response condition, the company was described as having a
history of mishandling such reports, often resulting in either no action or inappropriately
light punishments.
The dependent variables sought to measure intention to report in a similar manner to
previous research (Ayers and Kaplan, 2005; Brink et al., 2013; Kaplan et al., 2011; Kaptein,
2011). Here, participants are asked both for how they believe the individual in the scenario
would respond as well as how they personally would respond if in the same situation. The
dependent variables were both measured on a 0 to 100 scale anchored with “not at all likely”
and “very likely”.
Similar to many whistleblowing studies (Brink et al., 2017; Patel, 2003; Kaplan et al.,
2011), reporting intentions are measured from both the first and third person perspectives so
that social desirability bias can be computed as the difference and then included as a
covariate. The tendency of individuals to answer questions in the way they believe will be
viewed favorably by others (when asked what they personally would do) in an effort to
present themselves positively (Chung and Monroe, 2003; Fisher and Katz, 2000; King and
Bruner, 2000), and must be anticipated in studies of the unmitigated deviance of
hypothetical parties. Krumpal (2013) states that, “survey questions about taboo topics such
as [. . .] social fraud [. . .] often generate inaccurate survey estimates which are distorted by
social desirability bias” (p. 2025). Ahmad et al. (2014) argue that a method should be used to
account for social desirability bias so that the validity and reliability of study results are not
weakened, and argue for the use of the first/third person method (as we use here).

4.4 Participants
Participants are individuals with bookkeeping or accounting experience who were recruited
through social networks, including Facebook and LinkedIn. Participants were not paid. All
individuals who clicked on the survey link were required to pass a five-question accounting
quiz (financial statements, debit/credit exercises) to proceed on to the actual experiment.
Several individuals were not able to pass the quiz and were excluded from the experiment at
JAOC that point. Restricting participants in this manner added external validity to the request that
15,4 the situation be judged by a knowledgeable individual who could imagine themselves in the
role of the person who discovers the fraud. Participants took an average of 13 min to
complete the entire instrument.
A total of 99 participants completed the entire instrument. Table I summarizes the
background information about these participants. Participants’ mean age was 39, 51.5
664 per cent were female and 97.9 per cent had an undergraduate degree or higher. Nearly 77
per cent of participants had five or more years of full-time work experience, with 43 per cent
currently employed as an analyst, staff, corporate or tax accountant, 27 per cent as
accounting controllers or managers, and 18 per cent as auditors. Statistical analysis applied
to the provided demographic information did not reveal any differences between the groups
formed by these conditions.

5. Results
5.1 Manipulation checks
To check the ethics manipulation, participants were asked “What was the overall
impression given of the company’s ethical culture?” and responded on a scale from 0 to 100,
anchored with “weak ethical culture” and “strong ethical culture.” The mean score for
participants in the less articulated ethical culture condition was 36.24 (SD = 28.36). The
mean score for participants in the more articulated ethical culture condition was 54.35 (SD =
33.73). Although, 23 participants failed this manipulation check, t-test results show that the
two ethical culture groups indicated significantly different scores (t = 2.730, p < 0.01).
To check the outcome of previous reports manipulation, participants were asked “What
impression did you get about how the company has previously responded to reports of
unethical behavior?” This asked respondents to respond on a scale from 0 to 100, anchored
with “no response” and “strong response.” The mean score for participants in the bad
outcome of previous reports condition was 18.38 (SD = 17.51). The mean score for
participants in the good outcome of previous reports condition was 70.80 (SD = 27.53).
Although 21 participants failed this manipulation check t-test results show that the two
outcome of previous reports groups indicated significantly different scores (t = 11.326, p <
0.001).
In total, 40 participants failed one of the manipulation checks. However, when the
analysis was limited to only successful participants whose responses were within one
standard deviation of the mean, the results are strengthened (p-values decrease). Because the
group-based manipulation tests were successful, the conservative approach to conduct
the hypotheses tests using the entire participant sample was taken.

5.2 Tests of hypotheses

Following a successful assessment of the linearity and error term characteristic
assumptions, an ANCOVA is used to test H1-H3. Participants’ reporting intention to the
supervisor serves as the dependent variable. The organizational ethical environment and the
outcome of previous reports made about unethical conduct are the independent variables of
interest. As shown in Table II, the model explains a strong 32.6 per cent of the variance in
the dependent variable. Social desirability bias is a significant covariate (Pearson correlation
of 0.537, p < 0.001) and is retained in the model.
H1 pertained to the direct effect of the company’s ethical climate. The main effect of
company ethics is significant for likelihood of reporting to the supervisor (F(1,94) = 4.348,
p < 0.05, one-tail), where participants in the positive ethics condition indicated a higher
intention to report, with a mean of 87.81 (SE = 4.62), than those participants in the negative
 Enacted
All participants
ethical
Age climates
Mean 38.97
SD 14.11
Gender
Male 48.5% 665
Female 51.5%
Degree
High School 2.0%
Associates 0.0%
Undergraduate 54.5%
Masters 40.4%
Doctorate 3.0%
Academic Major
Accounting 87.9%
Finance 4.0%
Business 7.1%
Other 1.0%
Full-time work experience
0-2 years 15.2%
3-4 years 8.1%
5-10 years 26.3%
11-15 years 11.1%
16-20 years 7.1%
20þ years 32.3%
All participants = 99
Type of accounting position
Staff Accountant 16.2%
Corporate Accountant 7.1%
Analyst 10.1%
Tax Accountant 9.1%
Auditor 18.2%
A/P or A/R 2.0%
Accounting Controller/Manager 27.3%
Consultant 2.0%
Other 8.1%
Sector
Public Company 39.4%
Private Company 38.4%
Non-Profit Organization 4.0%
Government 9.1%
Self-Employed 3.0%
Other 6.1%
CPA
Yes 41.4% Table I.
No 58.6%
Demographic
(continued) information
JAOC
15,4 All participants

Professional associations
State Society of CPAs 28.3%
AICPA 26.3%
IMA 7.1%
666 IIA 3.0%
ISACA 2.0%
NATP 1.0%
Table I. AWSCPA/AFWA 1.0%

Panel A: ANCOVA results with social desirability bias as a covariate

SS df MS F p-value*
Social desirability bias 15,056.79 1 15,056.79 29.578 <0.001
Ethical environment 2,213.49 1 2,213.49 4.348 0.020
Previous report 9,729.26 1 9,729.26 19.112 <0.001
Ethical environment
previous report 1,982.05 1 1,982.05 3.894 0.026
Error 47,851.25 94 509.06
Total 755,017.00 99
R Squared = 0.353, Adjusted R squared = 0.326
*p-values are one-tailed
Panel B: Cell Means (Standard Error) {Sample Size} across treatment conditions with social desirability bias
as a covariate
Negative outcome of Positive outcome of previous Main effect: ethical
previous reports reports environment
Negative ethical 63.74 92.84 78.29
environment (4.53) (4.50) (4.51)
{25} {26} {51}
Positive ethical 82.26 93.36 87.81
environment (4.53) (4.71) (4.62)
{25} {23} {48}
Main effect: previous 73.00 93.10 83.05
reports (4.53) (4.60) (4.57)
{50} {49} {99}

Notes: Cell means represent participant responses to the following question: “How likely is it that you
Table II. would report this instance of questionable behavior to your supervisor?” Participants indicated their
response on a sliding scale from 0 to 100, anchored with not at all likely and very likely. Ethical
Participants’ environment is whether the participant received the paragraph which indicated a positive environment or a
likelihood of negative environment. Outcome of previous reports is whether the participant received the paragraph
reporting which indicated management had previously responded strongly or weakly to reports of unethical conduct

ethics condition, who had a mean of 78.29 (SE = 4.51). Therefore, the results are consistent
with the hypothesis.
H2 concerns the likelihood of reporting fraud under differing historical response to fraud
by management conditions. The main effect of outcome of previous reports is significant for
likelihood of reporting to the supervisor (F(1,94)=19.112, p < 0.001, one-tail). Participants in
the positive previous outcome condition indicated a higher intention to report with a mean of
93.10 (SE = 4.60), than participants in the negative previous outcome condition who had a Enacted
mean of 73.00 (SE = 4.53). Therefore, the results are consistent with the second hypothesis. ethical
H3 specified an interaction effect by expecting that individuals will be less likely to
report fraud when management has responded less diligently and forcefully in the past in
climates
the incongruous situation that the organization has signaled the existence of a positive
ethical environment. The interaction is significant for likelihood of reporting to the
supervisor (F(1,94)=3.894, p < 0.05, one tail). The cell with the highest likelihood of reporting
is positive ethical environment/positive outcome for previous reports with a mean of 93.36
667
(SE = 4.71), and the cell with the lowest likelihood of reporting is negative ethical
environment/negative outcome for previous reports with a mean of 63.74 (SE = 4.53).
Figure 1 depicts the consistency with expectations as the gap between negative and positive
previous outcome is largest for a negative ethical environment.

5.3 Mediation analysis

The previously discussed hypotheses and results are explained using psychological contract
violation theory. The significant results indicate that the occurrence of a violation should
explain the findings. In other words, PCV should act as a rationale that connects both the
manipulations of organizational ethical climate and outcome of previous reports, and
the observed whistleblowing behavior. Whereas this is a quite plausible interpretation of the
motives that the experiment has induced for participants, we cannot be sure that this is their
only way of seeing the situation. More analysis is necessary to explore whether PCV
constitutes the primary mental pathway between ethical environment/outcome of previous
reports and intention to report to the supervisor. To gain this insight, participants were
asked questions in the experimental instrument to determine if they thought a psychological
contract was present and if the events described constituted a contract violation.
Participants were asked three questions to ascertain whether a psychological contract
existed surrounding company ethics and how management is witnessed to behave. Every
participant responded “yes” when asked, “When working for a company, is it important to

100

95
Whistleblowing Intention

90

85

80 Negative Environment
Positive Environment
75

70

65

60
Negative Outcome Positive Outcome

Notes: Figure 1 reports the participants’ likelihood of

reporting the fraud to a supervisor by experimental
condition. The experiment varies the observed outcome of
previous reports of unethical activity (weak or strong) and Figure 1.
the ethical environment of the organization (negative or Likelihood of
reporting
positive)
JAOC you that the company to have a strong ethical culture?” Additionally, when asked, “When
15,4 working for a company, do you expect management to lead by example?” all participants
again responded “yes.” Participants then responded on a scale of 0 to 100, anchored with
“low importance” and “high importance,” to the question: “How important is it to you that
your company behave consistently with their stated intentions?” The mean score of 94.29
(median = 96, SD = 6.61) indicates high importance. From these results, it appears that
668 respondents at least initially expect organizations to have strong positive ethical cultures.
Employees may expect management to lead by example, and act in alignment with stated
policies, training and cultural norms. Based on these results, a psychological contract
appears to exist between the employee and the organization surrounding culture and how
management acts to enforce it.
After completing the experimental task, participants answered questions to determine if
their psychological contract was violated in their reading of the scenario they were given.
The participants were asked to respond to on a scale from 0 to 100, “In the situation I just
read about, I would feel: 0 = frustrated with IBC, 100 = happy with IBC”, “In the situation I
just read about, I would feel: 0 = disappointed with IBC, 100 = pleased with IBC”, and,
“Please indicate how well, in the situation previously described, IBC has fulfilled its
obligations to you: 0 = very poorly fulfilled, 100 = very well fulfilled.” An average response
score was created for each individual and used to test mediation in the model.
The juxtaposition of these explicit answers essentially creates an opportunity to conduct
the mediation analysis recommended by Baron and Kenny (1986) that uses a correlation
analysis that is confirmed using confirmatory factor analysis. Here we seek to determine
through the correspondence between the experimental decision and the explicit
acknowledgements whether a psychological contract violation plays the primary role in the
paths of the model.
The results indicate that the experimental outcome of previous reports is significantly
correlated with the PCV mediator variable. The standardized beta of the outcome of
previous reports to intention to report to the supervisor path is 0.46 (standardized total
effects and direct effects are 0.46). This suggests that people identify the inconsistent action
of the company as a contract violation. However, there is less connection between the
experimental ethical environment and the PCV mediator variable. That this portion of the
mediation is not significant, indicates that participants’ conscious ability to label
psychological contracts as such is incomplete and therefore is not the full explanation of
their thinking about the ethical environment.
When the psychological contract violation mediator is added to the model the
standardized beta of this path is 0.36 (standardized total effects are 0.47, direct effects are
0.36, and indirect effects are 0.11). These results indicate partial mediation through explicitly
identified PCV. Standardized betas and p-values are displayed in the model shown in
Figure 2.

6. Conclusion
Most of our knowledge about psychological contracts, and reactions to their violation, has
been assembled through surveys. Many of these are impressively large data collections that
have allowed us an informed picture of what employees actually think about frustrated
expectations (Coyle-Shapiro and Kessler, 2000). Sometimes surveys allow us to see if our
basic ideas are sufficiently robust to describe neglected sectors, such as public sector
employment (Coyle-Shapiro, 2002). However, survey data is always more problematic than
we like to admit, and the psychological contract literature is no exception (Freese and
Schalk, 2008). In more recent years, researchers have turned to experiments to attempt to get
 Enacted
ethical
climates

669

Figure 2.
PCV as a mediator

greater control and lower “noise.” Only through purposefully controlled variables can we
discover what really matters in a situation.
This paper could be seen as a juxtaposition of literatures. The study of those who report
wrongdoers (i.e. whistleblowers) is vast and undisciplined. By seeing the phenomena as a
socially generalized type of psychological contract, a needed theoretical basis (Miceli and
Near, 1985) is constructed. In the other direction, normative power is added to the
psychological contract literature. When fraud is afoot, individuals are called upon to do
selfless acts that depart widely from the standard whining over unmet entitlements to attain
personal rewards that unfortunately marks the area. The paper also brings the study of
JAOC fraud closer to the orbit of subjective ethics. As Gundlach et al. (2003) assert, every
15,4 whistleblowing case is a personalized attribution scenario. This research downplays
conventional whistleblowing parameters that have focused upon the fraudulent act and the
psychological characteristics of its observer (Taylor and Curtis, 2013; Curtis and Taylor,
2009) to prioritize the intensity of the perceived ethical climate that surrounds the events.
In many ways, the psychological contract is an overly rationalized account of human
670 behavior. To believe that people are constantly keeping score of what they are owed and
aligning its delivery with the quality and quantity of their efforts, may be a reflection of an
accountants’ worldview. Even if the contract is grounded in subjectivities, that which is
truly believed is real in its consequences (Thomas and Thomas, 1928). Whistleblowing
offers individuals a chance to do something that involves higher-order conceptions of
distributive justice, and therefore is inherently emotional in texture (Gundlach et al., 2003).
Rather than straining to ground behavior in farfetched theories of reasoned action (Izraeli
and Jaffe, 1998), we go beyond instrumental values (Murphy et al., 2012) to broader ideas of
who will be hurt and their relative culpability (Miceli and Near, 1992).
Although the research does not explicitly consider the changing nature of employment in
today’s economy (Chaudhry and Song, 2014), this dynamic condition merits observation. If
employment becomes more flexible and more fluid in the future, employees may become less
attentive to ethical signaling by organizations. The psychological contract may have to be
made more explicit, essentially more similar to a legally enforceable contract. Gratuitous
whistleblowing facilitated by unrecognized feelings of reciprocity might be more
endangered.
This paper did not explicitly consider whether a “new” employment relationship has or is
emerging. We can all agree that what employment means is not constant (Chaudhry and
Song, 2014). Here, some writers touch on the increased use of teams (Sverdrup and Schei,
2015), external job market conditions for employees (Morrison and Robinson, 1997) and
strain on organizational resources (Guest, 1998) as predicates for new contract flexibilities.
One might also expect that basic exchanges in employment will become more complex over
time (Alcover et al., 2017). Such may be the reason that organizations that offer
whistleblowing rewards often get counter-intuitive and undesired results (Brink et al., 2013).
The very nature of the psychological contract weighs against simple solutions to the
problems of insufficient whistleblowing in organizations. The basic idea is that everything
matters to employees and perceived shortcomings may dissuade performances in unrelated
domains. This research takes this holistic problem even further, suggesting that
organizational failures might have nothing to do with employee benefits, but instead pertain
to inadequacies of its ethical leadership. A failure to aspire to say the right things about
righteousness and to follow up with actual behaviors consistent with that aspiration leads to
more unreported fraud. A clear suggestion would be for organizations to seek to do better in
this realm, or to at least appreciate that the failure to model correct norms and behaviors will
create collateral problems in the denial of extra-role fidelity by employees.
Two other dimensions often seen in the whistleblowing literature were not modeled even
though a case could be made about their relevance. In the real world, the quality of the
evidence that wrongdoing has occurred matters to an observer’s reaction. Nobody benefits
from a false accusation, and weak evidence muddies conclusions about the ethical climate.
Unfortunately, evidence strength intertwines with type of fraud (Near et al., 2004), making it
unclear if participants were making evidentiary distinctions. Whistleblowers also face
possible retaliation. Although such events are much more likely for external whistleblowers,
some degree of interpersonal “blowback” is likely for internal reporting. Fayard et al. (2014)
for example show reporting is more likely when such retributive consequences are not high Enacted
(see also Wainberg and Perreault, 2016). ethical
This paper has several limitations. To focus on organizational elements believed
involved in psychological contracts, individual differences are not emphasized. This does
climates
not suggest that future research should also ignore them. One difference that might merit
more attention is national culture. For example, individuals from high power distance
cultures tend to react less to psychological contract violations (Zagenczyk et al., 2015). Some
671
groups apparently do not as readily subscribe to what could be called organized dissent
(Zhuang et al., 2005). Ethical cultures also have to be more integrated with ideas about where
power exists in the organization (Kaplan et al., 2010) but at the same time decomposed into
more specific elements about its operation (Kaptein, 2011).
The experimental method used in this research offers the advantage of rigorous control
over the ideas that surveys allow to vary when processed by the minds of respondents.
However, that method cannot offer the richness of some qualitative methods such as
interviews with knowledgeable subjects. Unfortunately, that approach would not work well
here due to the social desirability dimension of the fraud reporting phenomenon as well as
the exceptional circumstances that would have to be isolated in the real world by
researchers.
The hypotheses were grounded in the framework of exchange theory, from which the
logic of psychological contracts originates. The results suggest that ethical organizations
provide most people with socioeconomic resources that serve as an element of exchange to
which most feel obligated to reciprocate with appropriate prosocial acts. While other
currencies may be available to employees in their actual employments, reporting fraud
seems to be within the set of valuable performances employees can offer to balance their
workplace relationships.

References
Adams, J.S. (1965), “Inequity in social exchange”, Advances in Experimental Social Psychology, Vol. 2,
pp. 267-299.
Ahmad, S.A., Ismail, I.S., Azmi, N.A. and Zakaria, N.B. (2014), “Methodological issues in whistle-
blowing intentions research: addressing the social desirability bias and order effects”, Procedia –
Social and Behavioral Sciences, Vol. 145, pp. 204-210.
Ahmed, A., Hasnain, N. and Venkatesan, M. (2012), “Decision making in relation to personality types
and cognitive styles of business students”, The IUP Journal of Management Research, Vol. 11
No. 2, pp. 20-29.
Alcover, C.M., Rico, R., Turnley, W.H. and Bolino, M.C. (2017), “Understanding the changing nature of
psychological contracts in 21st century organizations: a multiple-foci exchange relationships
approach and proposed framework”, Organizational Psychology Review, Vol. 7 No. 1, pp. 4-35.
American Institute of Certified Public Accountants (AICPA) (2002), Consideration of Fraud in a
Financial Statement Audit. Statement on Auditing Standards No. 99, AICPA, New York, NY.
Argyris, C. (1960), Understanding Organizational Behavior, Tavistock Publications, London.
Association of Certified Fraud Examiners (ACFE) (2018), Report to the Nations, ACFE, Austin, TX.
Ayers, S. and Kaplan, S.E. (2005), “Wrongdoing by consultants: an examination of employees’
reporting intentions”, Journal of Business Ethics, Vol. 57 No. 2, pp. 121-137.
Baron, R.M. and Kenny, D.A. (1986), “The moderator-mediator variable distinction in social psychology
research: conceptual, strategic, and statistical considerations”, Journal of Personality and Social
Psychology, Vol. 51 No. 6, pp. 1173-1182.
JAOC Bernardi, R.A. and Guptill, S.T. (2008), “Social desirability response bias, gender, and factors
influencing organizational commitment: an international study”, Journal of Business Ethics,
15,4 Vol. 81 No. 4, pp. 797-809.
Berry, B. (2004), “Organizational culture: a framework and strategies for facilitating employee
whistleblowing”, Employee Responsibilities and Rights Journal, Vol. 16 No. 1, pp. 1-11.
Blau, P.M. (1964), Exchange and Power in Social Life, Wiley, New York, NY.
672 Brink, A.G., Lowe, D.J. and Victoravich, L.M. (2013), “The effect of evidence strength and internal
rewards on intentions to report fraud in the Dodd-Frank regulatory environment”, Auditing: A
Journal of Practice and Theory, Vol. 32 No. 3, pp. 87-104.
Brink, A.G., Lowe, D.J. and Victoravich, L.M. (2017), “The public company whistleblowing
environment: perceptions of a wrongful act and monetary attitude”, Accounting and the Public
Interest, Vol. 17 No. 1, pp. 1-30.
Butler, J.K. (1991), “Toward understanding and measuring conditions of trust: evolution of conditions
of trust inventory”, Journal of Management, Vol. 17 No. 3, pp. 643-663.
Castellano, J.F. and Lightle, S.S. (2005), “Using cultural audits to assess tone at the top”, The CPA
Journal, Vol. 75 No. 2, p. 6.
Chaudhry, A. and Song, L.J. (2014), “Rethinking psychological contracts in the context of organizational
change: the moderating role of social comparison and social exchange”, The Journal of Applied
Behavioral Science, Vol. 50 No. 3, pp. 337-363.
Chen, A.Y.S., Sawyers, R.B. and Williams, P.F. (1997), “Reinforcing ethical decision making through
corporate culture”, Journal of Business Ethics, Vol. 16 No. 8, pp. 855-865.
Chong, V.K. and Law, M.B. (2016), “The effect of a budget-based incentive compensation scheme on job
performance: the mediating role of trust-in-supervisor and organizational commitment”, Journal
of Accounting and Organizational Change, Vol. 12 No. 4, pp. 590-613.
Chung, J. and Monroe, G.S. (2003), “Exploring social desirability bias”, Journal of Business Ethics,
Vol. 44 No. 4, pp. 291-302.
Committee of Sponsoring Organizations of the Treadway Commission (COSO) (2013), Internal
Control – Integrated Framework, AICPA, New York, NY.
Coyle-Shapiro, J.A.M. (2002), “A psychological contract perspective on organizational citizenship
behavior”, Journal of Organizational Behavior, Vol. 23 No. 8, pp. 927-946.
Coyle-Shapiro, J.A.M. and Conway, N. (2005), “Exchange relationships: examining psychological
contracts and perceived organizational support”, Journal of Applied Psychology, Vol. 90 No. 4,
p. 774.
Coyle-Shapiro, J.A.M. and Kessler, I. (2000), “Consequences of the psychological contract for the
employment relationship: a large scale survey”, Journal of Management Studies, Vol. 37 No. 7,
pp. 903-930.
Coyle-Shapiro, J.A.M., Kessler, I. and Purcell, J. (2004), “Exploring organizationally directed
citizenship behaviour: reciprocity or ‘it’s my job”, Journal of Management Studies, Vol. 41
No. 1, pp. 85-106.
Cressey, D.R. (1973), Introduction to the Reprint Edition. Other People’s Money. A Study in the Social
Psychology of Embezzlement, 2nd ed., Patterson Smith, Montclair, NJ.
Cropanzano, R. and Mitchell, M.S. (2005), “Social exchange theory: an interdisciplinary review”, Journal
of Management, Vol. 31 No. 6, pp. 874-900.
Cullen, J.B., Parboteeah, K.P. and Victor, B. (2003), “The effects of ethical climates on organizational
commitment: a two-study analysis”, Journal of Business Ethics, Vol. 46 No. 2, pp. 127-141.
Curtis, M.B. and Taylor, E.Z. (2009), “Whistleblowing in public accounting: influence of identity
disclosure, situational context, and personal characteristics”, Accounting and the Public Interest,
Vol. 9 No. 1, pp. 191-220.
Curtis, M.B. and Williams, J.M. (2014), “The impact of culture and training on code of conduct Enacted
effectiveness: reporting of observed unethical behavior”, Research on Professional Responsibility
and Ethics in Accounting, Vol. 18, pp. 1-31.
ethical
Davis, J.S. and Pesch, H.L. (2013), “Fraud dynamics and controls in organizations”, Accounting,
climates
Organizations and Society, Vol. 38 Nos 6/7, pp. 469-483.
De Vos, A., Buyens, D. and Schalk, R. (2003), “Psychological contract development during organization
socialization: adaptation to reality and the role of reciprocity”, Journal of Organizational
Behavior, Vol. 24 No. 5, pp. 537-559. 673
DiMaggio, P. and Powell, W.W. (1983), “The iron cage revisited: collective rationality and
institutional isomorphism in organizational fields”, American Sociological Review, Vol. 48
No. 2, pp. 147-160.
Dulac, T., Coyle-Shapiro, J.A.M., Henderson, D.J. and Wayne, S.J. (2008), “Not all responses to breach are
the same: a longitudinal study examining the interconnection of social exchange and
psychological contract processes in organizations”, Academy of Management Journal, Vol. 51
No. 6, pp. 1079-1098.
Erkmen, T., Özsözgün Çalıs kan, A. and Esen, E. (2014), “An empirical research about whistleblowing
behavior in accounting context”, Journal of Accounting and Organizational Change, Vol. 10
No. 2, pp. 229-243.
Fayard, D., Cockrell, R.C. and Curtis, M.B. (2014), “An experimental economics approach to the study of
whistleblowing”, Journal of Forensic and Investigative Accounting, Vol. 6 No. 1, pp. 123-150.
Fayyazi, M. and Aslani, F. (2015), “The impact of work-life balance on employees’ job satisfaction and
turnover intention; the moderating role of continuance commitment”, International Letters of
Social and Humanistic Sciences, Vol. 51, pp. 33-41.
Fisher, R.J. and Katz, J.E. (2000), “Social-desirability bias and the validity of self-reported values”,
Psychology and Marketing, Vol. 17 No. 2, pp. 105-120.
Ford, R.C. and Richardson, W.D. (1994), “Ethical decision making: a review of the empirical literature”,
Journal of Business Ethics, Vol. 13 No. 3, pp. 205-211.
Fredin, A. (2012), “The unexpected cost of staying silent”, Strategic Finance, Vol. 93 No. 10, pp. 53-59.
Freese, C. and Schalk, R. (2008), “How to measure the psychological contract? A critical criteria-based
review of measures”, South African Journal of Psychology, Vol. 38 No. 2, pp. 269-286.
Gouldner, A.W. (1960), “The norm of reciprocity: a preliminary statement”, American Sociological
Review, Vol. 25 No. 2, pp. 161-178.
Greenbaum, R.L., Mawritz, M.B. and Piccolo, R.F. (2015), “When leaders fail to walk the talk supervisor
undermining and perceptions of leader hypocrisy”, Journal of Management, Vol. 41 No. 3,
pp. 929-956.
Grimmer, M. and Oddy, M. (2007), “Violation of the psychological contract: the mediating effect of
relational versus transactional beliefs”, Australian Journal of Management, Vol. 32 No. 1,
pp. 153-174.
Guest, D.E. (1998), “Is the psychological contract worth taking seriously?”, Journal of Organizational
Behavior, Vol. 19 No. S1, pp. 649-664.
Guest, D.E. and Conway, N. (2002), “Communicating the psychological contract: an employer
perspective”, Human Resource Management Journal, Vol. 12 No. 2, pp. 22-38.
Gundlach, M.J., Douglas, S.C. and Martinko, M.J. (2003), “The decision to blow the whistle: a social
information processing framework”, Academy of Management Review, Vol. 28 No. 1,
pp. 107-123.
Hogan, C.E., Rezaee, Z., Riley, R.A., Jr and Velury, U.K. (2008), “Financial statement fraud:
insights from the academic literature”, Auditing: A Journal of Practice and Theory, Vol. 27
No. 2, pp. 231-252.
JAOC Homans, G.C. (1958), “Social behavior and exchange”, American Journal of Sociology, Vol. 63 No. 6,
pp. 597-606.
15,4
Izraeli, D. and Jaffe, E.D. (1998), “Predicting whistle blowing: a theory of reasoned action approach”,
International Journal of Value-Based Management, Vol. 11 No. 1, pp. 19-34.
Jensen, J.M., Opland, R.A. and Ryan, A.M. (2010), “Psychological contracts and counterproductive work
behaviors: employee responses to transactional and relational breach”, Journal of Business and
674 Psychology, Vol. 25 No. 4, pp. 555-568.
Jones, G.E. and Kavanagh, M.J. (1996), “An experimental examination of the effects of individual and
situational factors on unethical behavioral intentions in the workplace”, Journal of Business
Ethics, Vol. 15 No. 5, pp. 511-523.
Kaplan, S.E., Pope, K.R. and Samuels, J.A. (2010), “The effect of social confrontation on
individuals’ intentions to internally report fraud”, Behavioral Research in Accounting,
Vol. 22 No. 2, pp. 51-67.
Kaplan, S.E., Pope, K.R. and Samuels, J.A. (2011), “An examination of the effect of inquiry and auditor
type on reporting intentions for fraud”, Auditing: A Journal of Practice and Theory, Vol. 30 No. 4,
pp. 29-49.
Kaplan, S.E., Moulang, C. and Strydom, M. (2016), “Does whistle-blowing and prior outcomes for
whistle-blowing and wrongdoers impact the likelihood of others blowing the whistle?”, in
AFAANZ Meetings, Gold Coast, Australia.
Kaptein, M. (2011), “From inaction to external whistleblowing: the influence of the ethical culture of
organizations on employee responses to observed wrongdoing”, Journal of Business Ethics,
Vol. 98 No. 3, pp. 513-530.
King, M.F. and Bruner, G.C. (2000), “Social desirability bias: a neglected aspect of validity testing”,
Psychology and Marketing, Vol. 17 No. 2, pp. 79-103.
Kotter, J.P. (1973), “The psychological contract: managing the joining-up process”, California
Management Review, Vol. 15 No. 3, pp. 91-99.
Koumbiadis, N. (2014), “Morality, ethical awareness and ethical behavior in business: challenges for
21st century ethical organizations”, Journal of Accounting and Organizational Change, Vol. 10,
No. 2, pp. 150-179.
Kroll (2018), “Global Fraud and Risk Report”, New York, NY.
Krumpal, I. (2013), “Determinants of social desirability bias in sensitive surveys: a literature review”,
Quality and Quantity, Vol. 47, pp. 2025-2047.
Larmer, R.A. (1992), “Whistleblowing and employee loyalty”, Journal of Business Ethics, Vol. 11 No. 2,
pp. 125-128.
Law, P. (2011), “Corporate governance and no fraud occurrence in organizations: Hong Kong evidence”,
Managerial Auditing Journal, Vol. 26 No. 6, pp. 501-518.
McCuddy, M.K., Reichardt, K.E. and Schroeder, D.L. (1993), “Ethical pressures: fact or fiction?”,
Management Accounting, Vol. 74 No. 10, pp. 57-61.
Martin, K.D. and Cullen, J.B. (2006), “Continuities and extensions of ethical climate theory: a meta-
analytic review”, Journal of Business Ethics, Vol. 69 No. 2, pp. 175-194.
Mayer, D.M., Nurmohamed, S., Trevino, L.K., Shapiro, D.L. and Schminke, M. (2013), “Encouraging
employees to report unethical conduct internally: it takes a village”, Organizational Behavior and
Human Decision Processes, Vol. 121 No. 1, pp. 89-103.
Meindl, J.R., Ehrlich, S.B. and Dukerich, J.M. (1985), “The romance of leadership”, Administrative
Science Quarterly, Vol. 30 No. 1, pp. 78-102.
Mesmer-Magnus, J.R. and Viswesvaran, C. (2005), “Whistleblowing in organizations: an examination of
correlates of whistleblowing intentions, actions, and retaliation”, Journal of Business Ethics,
Vol. 62 No. 3, pp. 277-297.
Meyer, J.W. and Rowan, B. (1977), “Institutionalized organizations: formal structure as myth and Enacted
ceremony”, American Journal of Sociology, Vol. 83 No. 2, pp. 340-363.
ethical
Miceli, M.P. and Near, J.P. (1985), “Characteristics of organizational climate and perceived
wrongdoing associated with whistleblowing decisions”, Personnel Psychology, Vol. 38
climates
No. 3, pp. 525-544.
Miceli, M.P. and Near, J.P. (1988), “Individual and situational correlates of whistle-blowing”, Personnel
Psychology, Vol. 41 No. 2, pp. 267-281.
Miceli, M.P. and Near, J.P. (1992), Blowing the Whistle: The Organizational and Legal Implications for
675
Companies and Employees, Lexington Books, New York, NY.
Miceli, M.P., Near, J.P. and Dworkin, T.M. (2008), Whistle-Blowing in Organizations, Routledge/Taylor
and Francis Group, New York, NY.
Miller, D.L. and Thomas, S. (2005), “The impact of relative position and relational closeness on the
reporting of unethical acts”, Journal of Business Ethics, Vol. 61 No. 4, pp. 315-328.
Morrison, E.W. and Robinson, S.L. (1997), “When employees feel betrayed: a model of how
psychological contract violation develops”, Academy of Management Review, Vol. 22 No. 1,
pp. 226-256.
Murphy, P.R., Free, C. and Branston, C. (2012), “The role of ethical climate in fraud”, CAAA Annual
Conference.
Near, J.P. and Miceli, M.P. (1987), “Whistle-blowers in organizations: dissidents or reformers?”,
Research in Organizational Behavior, Vol. 9, pp. 321-368.
Near, J.P. and Miceli, M.P. (1995), “Effective whistleblowing”, The Academy of Management Review,
Vol. 20 No. 3, pp. 679-708.
Near, J.P., Rehg, M.T., Van Scooter, J.R. and Miceli, M.P. (2004), “Does type of whistle-blowing affect the
whistle-blowing process?”, Business Ethics Quarterly, Vol. 14 No. 2, pp. 219-242.
Nitzi, C. (2017), “The drivers of a superior’s trust formation in his subordinate”, Journal of Accounting
and Organizational Change, Vol. 8 No. 3, pp. 310-339.
Organ, D.W. (1988), Organizational Citizenship Behavior: The Good Soldier Syndrome, Lexington
Books, Lexington, MA.
Organ, D.W. (1997), “Organizational citizenship behavior: it’s construct clean-up time”, Human
Performance, Vol. 10 No. 2, pp. 85-97.
Organ, D.W. and Ryan, K. (1995), “A meta-analytic review of attitudinal and dispositional
predictors of organizational citizenship behavior”, Personnel Psychology, Vol. 48 No. 4,
pp. 775-802.
Patel, C. (2003), “Some cross-cultural evidence on whistle-blowing as an internal control mechanism”,
Journal of International Accounting Research, Vol. 2 No. 1, pp. 69-96.
Pickerd, J.S., Summers, S.L. and Wood, D.A. (2015), “An examination of how entry-level staff auditors
respond to tone at the top vis-à-vis tone at the bottom”, Behavioral Research in Accounting,
Vol. 27 No. 1, pp. 79-98.
Podsakoff, P.M., Ahearne, M. and MacKenzie, S.B. (1997), “Organizational citizenship behavior and the
quantity and quality of work group performance”, Journal of Applied Psychology, Vol. 82 No. 2,
pp. 262-270.
Public Company Accounting Oversight Board (PCAOB) (2007), An Audit of Internal Control over
Financial Reporting That Is Integrated with an Audit of Financial Statements. Auditing Standard
No. 5, PCAOB, Washington, DC.
PwC (2018), Global Economic Crime and Fraud Survey 2018.
Rae, K. and Subramaniam, N. (2008), “Quality of internal control procedures: antecedents and
moderating effect on organisational justice and employee fraud”, Managerial Auditing Journal,
Vol. 23 No. 2, pp. 104-124.
JAOC Ramamoorti, S. (2008), “The psychology and sociology of fraud: integrating the behavioral sciences
component into fraud and forensic accounting curricula”, Issues in Accounting Education,
15,4 Vol. 23 No. 4, pp. 521-533.
Rayton, B.A. and Yalabik, Z.Y. (2014), “Work engagement, psychological contract breach and job
satisfaction”, The International Journal of Human Resource Management, Vol. 25 No. 17,
pp. 2382-2400.
Reidenbach, R.E. and Robin, D.P. (1991), “A conceptual model of corporate moral development”, Journal
676 of Business Ethics, Vol. 10 No. 4, pp. 273-284.
Reiss Nitkin, M. (2012), “Does governance culture exist and can it be mandated?”, Journal of Accounting
and Organizational Change, Vol. 13, No. 3, pp. 356-379.
Rezaee, Z. (2005), “Causes, consequences, and deterrence of financial statement fraud”, Critical
Perspectives on Accounting, Vol. 16 No. 3, pp. 277-298.
Robinson, S.L. (1996), “Trust and breach of the psychological contract”, Administrative Science
Quarterly, Vol. 41 No. 4, pp. 574-599.
Robinson, S.L., Kraatz, M.S. and Rousseau, D.M. (1994), “Changing obligations and the psychological
contract: a longitudinal study”, Academy of Management Journal, Vol. 37 No. 1, pp. 137-152.
Robinson, S.L. and Morrison, E.W. (1995), “Psychological contracts and OCB: the effect of unfulfilled
obligations on civic virtue behavior”, Journal of Organizational Behavior, Vol. 16 No. 3,
pp. 289-298.
Robinson, S.L. and Morrison, E.W. (2000), “The development of psychological contract breach and
violation: a longitudinal study”, Journal of Organizational Behavior, Vol. 21 No. 5,
pp. 525-546.
Robinson, S.L. and Rousseau, D.M. (1994), “Violating the psychological contract: not the exception but
the norm”, Journal of Organizational Behavior, Vol. 15 No. 3, pp. 245-259.
Rousseau, D.M. (1989), “Psychological and implied contracts in organizations”, Employee
Responsibilities and Rights Journal, Vol. 2 No. 2, pp. 121-139.
Rousseau, D.M. (2001), “Schema, promise and mutuality: the building blocks of the psychological
contract”, Journal of Occupational and Organizational Psychology, Vol. 74 No. 4, pp. 511-541.
Ruiz-Palomino, P. and Martinez-Canas, R. (2011), “Corporate ethics and ethical behavior: the significant
function of top management role modeling”, Review of Business Information Systems (RBIS),
Vol. 15 No. 5, pp. 69-74.
Sak, A.M. (2006), “Antecedents and consequences of employee engagement”, Journal of Managerial
Psychology, Vol. 21 No. 7, pp. 600-619.
Schmidt, R.N. (2014), “The effects of auditors’ accessibility to tone at the top knowledge on audit
judgments”, Behavioral Research in Accounting, Vol. 26 No. 2, pp. 73-96.
Schwartz, M.S., Dunfree, T.W. and Kline, M.J. (2005), “Tone at the top: an ethics code for directors?”,
Journal of Business Ethics, Vol. 58 Nos 1/3, pp. 79-100.
Seifert, D.L., Sweeney, J.T., Joireman, J. and Thornton, J.M. (2010), “The influence of organizational
justice on accountant whistleblowing”, Accounting, Organizations and Society, Vol. 35 No. 7,
pp. 707-717.
Sherman, U.P. and Morley, M.J. (2015), “On the formation of the psychological contract a schema theory
perspective”, Group and Organization Management, Vol. 40 No. 2, pp. 160-192.
Sims, R.R. and Brinkman, J. (2003), “Enron ethics”, Journal of Business Ethics, Vol. 45 No. 3, pp. 243-256.
Soltani, B. (2014), “The anatomy of corporate fraud: a comparative analysis of high profile American
and European corporate scandals”, Journal of Business Ethics, Vol. 120 No. 2, pp. 251-274.
Suazo, M.M. and Stone-Romero, E.F. (2011), “Implications of psychological contract breach: a perceived
organizational support perspective”, Journal of Managerial Psychology, Vol. 26 No. 5,
pp. 366-382.
Suazo, M.M., Turnley, W.H. and Mai-Dalton, R.R. (2008), “Characteristics of the supervisor-subordinate Enacted
relationship as predictors of psychological contract breach”, Journal of Managerial Issues,
Vol. 20 No. 3, pp. 295-312. ethical
Sverdrup, T.E. and Schei, V. (2015), “Cut me some slack the psychological contracts as a foundation for climates
understanding team charters”, The Journal of Applied Behavioral Science, Vol. 51 No. 4,
pp. 451-478.
Taylor, E.Z. and Curtis, M.B. (2013), “Whistleblowing in audit firms: organizational response and
power distance”, Behavioral Research in Accounting, Vol. 25 No. 2, pp. 21-43. 677
Thomas, W.I. and Thomas, D. (1928), The Child in America: Behavior Problems and Programs, Alfred
Knopf, New York, NY.
Trompeter, G.M., Carpenter, T.D., Desai, N., Jones, K.L. and Riley, R.A. Jr, (2012), “A synthesis of fraud-
related research”, Auditing: A Journal of Practice and Theory, Vol. 32 No. 1, pp. 287-321.
Turnley, W.H. and Feldman, D.C. (1999), “The impact of psychological contract violations on exit,
voice, loyalty, and neglect”, Human Relations, Vol. 52 No. 7, pp. 895-922.
Turnley, W.H. and Feldman, D.C. (2000), “Re-examining the effects of psychological contract violations:
unmet expectations and job dissatisfaction as mediators”, Journal of Organizational Behavior,
Vol. 21 No. 1, pp. 25-42.
Victor, B. and Cullen, J.B. (1988), “The organizational bases of ethical work climates”, Administrative
Science Quarterly, Vol. 33 No. 1, pp. 101-125.
Wainberg, J. and Perreault, S. (2016), “Whistleblowing in audit firms: do explicit protections from
retaliation activate implicit threats of reprisal?”, Behavioral Research in Accounting, Vol. 28
No. 1, pp. 83-93.
Wang, I.Z. and Fargher, N. (2017), “The effects of tone at the top and coordination with external
auditors on internal auditors’ fraud risk assessments”, Accounting and Finance, Vol. 57 No. 4,
pp. 1177-1202.
Wimbush, J.C. and Shepard, J.M. (1994), “Toward and understanding of ethical climates: its relationship
to ethical behavior and supervisory influence”, Journal of Business Ethics, Vol. 13 No. 8,
pp. 637-647.
Zagenczyk, T.J., Cruz, K.S., Cheung, J.H., Scott, K.L., Kiewitz, C. and Galloway, B. (2015), “The
moderating effect of power distance on employee responses to psychological contract breach”,
European Journal of Work and Organizational Psychology, Vol. 24 No. 6, pp. 853-865.
Zagenczyk, T.J., Cruz, K.S., Woodard, A.M., Walker, J.C., Few, W.T., Kiazad, K. and Raja, M. (2013),
“The moderating effect of Machiavellianism on the psychological contract breach–
organizational identification/disidentification relationships”, Journal of Business and Psychology,
Vol. 28 No. 3, pp. 287-299.
Zhang, J., Pany, K. and Reckers, P.M.J. (2013), “Under which conditions are whistleblowing best
practices best?”, Auditing: A Journal of Practice and Theory, Vol. 32 No. 3, pp. 171-181.
Zhuang, J., Thomas, S. and Miller, D.L. (2005), “Examining culture’s effect on whistleblowing and peer
reporting”, Business and Society, Vol. 44 No. 4, pp. 462-486.

Corresponding author
Timothy J. Fogarty can be contacted at: [email protected]

For instructions on how to order reprints of this article, please visit our website:
www.emeraldgrouppublishing.com/licensing/reprints.htm
Or contact us for further details: [email protected]