Feeling Responsible Makes Employees Report Fraud, Until Someone Rationalizes It

Employees who see fraud at work often stay silent. Two of the most common reasons they give are that reporting is not their job, and that the fraud was somehow justified. A new experiment by Randall F. Young, Associate Professor of Accounting at the McCoy College of Business at Texas State University, tests how those two reasons interact. The paper appears in the Journal of Forensic Accounting Research.

The short answer: a sense of personal responsibility pushes employees toward reporting, but a plausible excuse for the fraud cancels that push.

The study

Young ran a controlled experiment. Participants faced a scenario involving financial accounting fraud. The design varied two things. The first was whether the participant felt personally responsible for reporting misconduct. The second was whether rationalizations for the fraud were offered, meaning reasons the wrongdoing might seem acceptable or harmless.

The outcome measured was internal whistleblowing intention. That is the stated willingness to report the problem inside the company, through channels like a supervisor, an ethics hotline, or internal audit, rather than to a regulator or the press.

Fraud rationalization is a familiar idea in forensic accounting. It is one leg of the fraud triangle, alongside pressure and opportunity. Prior work treats it as something the fraudster does to excuse their own actions. This study asks a different question: what happens when those same excuses reach a bystander?

What the researcher found

Consistent with earlier research, employees who accepted personal responsibility to report fraud were more willing to blow the whistle internally. That result held when no rationalization was present.

The new finding is what happens when a rationalization is added. Once an excuse for the fraud was on the table, the boost from personal responsibility disappeared. Employees who felt responsible were no more likely to report than employees who did not.

In plain terms, responsibility works only in a clean setting. A ready-made justification gives a would-be reporter permission to look away, even when they believe reporting is their duty.

What it means for managers and compliance leaders

Many organizations invest in telling employees that reporting misconduct is everyone’s responsibility. Codes of conduct, ethics training, and hotline campaigns all lean on this message. Young’s results suggest the message is necessary but not sufficient.

The weak point is rationalization. Fraudsters rarely act in silence. They explain, minimize, and reframe, and those explanations reach coworkers. Statements along the lines of “everyone does it” or “nobody gets hurt” can neutralize an employee’s sense of duty.

Three practical responses follow. First, training should name common rationalizations directly and teach employees to recognize them as warning signs rather than as reasons. Second, reporting procedures should not require the employee to decide whether the conduct was justified. That judgment belongs to investigators. Third, internal auditors and fraud examiners should treat a culture rich in excuses as a control weakness in its own right.

For forensic accountants, the study also adds a piece to the whistleblowing puzzle. Responsibility and rationalization have mostly been studied on their own. This experiment shows they interact, and that the interaction runs in the wrong direction for fraud detection.

This summary is based on the paper’s abstract. The full article reports the data, methods, and detailed results.

What it means for managers

• Telling employees that reporting is everyone's job works, but only when no excuse for the misconduct is in the air. Ethics messaging alone is not enough.
• Rationalizations are contagious. Excuses that fraudsters use for themselves also silence coworkers who would otherwise report. Train employees to treat excuses as red flags.
• Reporting procedures should not ask employees to judge whether the conduct was justified. Leave that judgment to investigators so a plausible story does not stop a report.

Young, R. F. (2025). The impact of responsibility to report and fraud rationalization on internal whistleblowing intentions. Journal of Forensic Accounting Research, 10(1), 260-277. 10.2308/jfar-2024-011