This will encourage greater internal reporting of misconduct and help to ensure

This will encourage greater internal reporting of

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environment, a high-quality audit committee is more likely to ensure that a good internal reporting system is implemented. Thiswill encourage greater internal reporting of misconduct and help to ensure reports of misconduct are promptly resolved, in turnreducing the likelihood of external whistle-blowing.Second, a high-quality audit committee is likely to enhance organizational responsiveness to internal reports. When theaudit committee is of a higher quality, there are more frequent interactions with the board, management, internal, and externalauditors (Cohen et al. 2010;Goodwin 2003;Goodwin and Yeo 2001). For example,Raghunandan et al. (2001)found thathigher-quality audit committees are more likely to have longer meetings with the chief internal auditor, ensure there is privateaccess to the chief internal auditor, and review internal auditing results. With better communication and greater informationsharing, internal reports are more likely to be properly received and promptly addressed. A high-quality audit committee is alsolikely to make better decisions when investigating internal reports because a higher-quality audit committee is more objectiveand less susceptible to management influences (Karamanou and Vafeas 2005;Li et al. 2012;Spira 1999). Further, a high-quality audit committee is more likely to ensure that internal deficiencies are resolved and remediated (Gendron and Be´dard2006;Goh 2009). Thus, a higher-quality audit committee is potentially more effective at ensuring that issues are properlyresolved internally. When internal reports are properly managed, the outcome is more likely to be satisfactory to the whistle-blower, which potentially reduces external whistle-blowing. Insofar that a higher-quality audit committee facilitates internalreporting and whistle-blowing investigation, having a higher-quality audit committee is likely to decrease the likelihood ofexternal whistle-blowing. Based on the discussion above, our first hypothesis is:H1:The likelihood of external whistle-blowing relative to internal reporting is lower when the audit committee is of ahigher quality.4For a more comprehensive review of research on audit committees, refer toTepalagul and Lin (2015).170Lee and FargherAuditing: A Journal of Practice & TheoryVolume 37, Number 1, 2018
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The Audit Committee and Retaliation against a Whistle-BlowerWhistle-blowers who report internally or externally may be retaliated against (Near and Miceli 2008;Rehg et al. 2008).Employers have been found to retaliate against a whistle-blower as a means of controlling their employees to maintain thepower-dependence relationships within the organization (Near and Jensen 1983;Parmerlee, Near, and Jensen 1982), or todiscredit or silence the whistle-blower (Mesmer-Magnus and Viswesvaran 2005;Near and Jensen 1983;Parmerlee et al. 1982;Rehg et al. 2008). We expect a high-quality audit committee to be associated with a lower likelihood of retaliation because ahigh-quality audit committee is known to provide stronger oversight and deter management from acting unethically, such as byconstraining aggressive financial reporting or corporate misreporting (Abbott et al. 2000;Abbott, Parker, and Peters 2004;Be
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