An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Steven E. Kaplan
Arizona State University

Joseph J. Schultz
Arizona State University

Abstract: The Sarbanes-Oxley Act of 2002 required public company audit committees to install an anonymous reporting system to assist in deterring and detecting accounting fraud and control weaknesses. It is generally accepted that such a system may reduce a potential reporter’s cost of reporting. The existence of such a system may decrease the overall effectiveness of a system employing only non-anonymous reporting options. We explore the extent to which the availability of an anonymous reporting channel influences intended use of non-anonymous reporting channels. Many firms have strengthened internal audit and increased their autonomy from upper management’s direct control. We test whether the “quality” of internal audit affects the intended reporting use of the internal audit. The study investigates intended reporting behavior across three different cases (i.e., settings). Results show significance for anonymous channel and setting, but not for internal audit quality.

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