Worth Taking Notice: Whistleblower Rules Regarding Auditing Firms


The Dodd-Frank Act and the U.S. Securities and Exchange Commission’s (SEC’s) final whistleblower rules generally preclude employees of public accounting firms from receiving whistleblower awards for information about an engagement client. The SEC has advised, however, that auditors will be permitted to make whistleblower submissions alleging that their public accounting firms violated the federal securities laws or professional standards. If the auditor’s submission leads to a successful enforcement action against an engagement client, the auditor will be eligible for an award based on the total monetary sanctions collected from the engagement client. The SEC’s back-door invitation may put audit clients in harm’s way of an auditor’s whistleblowing, contrary to the statute and auditor-client confidentiality.

On May 25, 2011, the U.S. Securities and Exchange Commission (SEC) released its final rules implementing the whistleblower provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). Under the new program, whistleblowers who voluntarily report securities violations to the SEC stand to reap a bounty of 10 to 30 percent of the SEC’s monetary recovery, provided that the whistleblower’s information leads to a successful enforcement action resulting in total monetary sanctions of more than $1 million.

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