Which option is NOT one of the conditions that allow internal accountants to become Dodd-Frank whistleblowers?

• A. Disclosure to the SEC is needed to prevent substantial injury to the financial interest of an entity or its investors
• B. The whistleblower reasonably believes the entity is impeding investigation
• C. The whistleblower has first reported the violation internally and at least 120 days have passed with no action
• D. Disclosure to the SEC is needed to prevent substantial injury to the audit firm

Answer: (D)

The situation tests what conditions make internal employees eligible for Dodd-Frank whistleblower protections and possible rewards. The program hinges on reporting securities violations in a way that protects the entity’s and investors’ financial interests. One valid condition is that a disclosure to the SEC is needed to prevent substantial injury to the financial interests of the entity or its investors, which is why reporting to the SEC is appropriate when the risk is real. Another valid condition is that the whistleblower reasonably believes the entity is impeding an investigation, signaling that internal diligence isn’t proceeding properly and external action may be warranted. A third valid condition is that the whistleblower has first reported the violation internally and at least 120 days have passed with no action, giving the company a chance to address the issue before escalating. The option about preventing injury to the audit firm doesn’t fit because the whistleblower provisions focus on protecting the entity and its investors, not the interests of the audit firm. Thus, that statement is not a valid condition for whistleblower eligibility.