This study examines the effect of peer employee relationships on the intention to internally report fraud. Organizations put employees together in departments, on teams for special projects, or in small sub-groups by specific job tasks. Employee interaction with coworkers, teams, and departments daily is necessary. Such interactions are governed by a number of variables, which may help (or hinder) in the forming of social exchange relationships. Interpersonal affect is the like or dislike feeling one individual has toward another, while reciprocity is the feeling of obligation or indebtedness one individual feels toward another. These feelings not only affect how employees treat one another, or how well they work together, but may also influence an employee’s likelihood to report fraud.

The 2016 ACFE Global Fraud Study finds that most organizations lose five percent of their revenues each year to fraud, with more than $6.3 billion in losses this year (ACFE, 2016). Kroll’s 2015/2016 Global Fraud Report finds that seventyfive percent of companies reported falling victim to fraud in the last year, with sixty-nine percent reporting that the fraud resulted in a financial loss. Fraud is most often perpetrated (eighty-one percent of cases) by a company insider (Kroll, 2015), necessitating effective internal controls and whistleblowing policies.