Not surprising but interesting nonetheless. A new study Who Blows The Whistle on Corporate Fraud shows the problem with Section 301 of the Sarbanes-Oxley Act, which requires audit committees to establish procedures for "the confidential, anonymous submission by employees of the issuer of concerns regarding questionable accounting or auditing matters."

According to the study, it doesn't provide much protection for whistleblowers at all.

Indeed, after analysing in depth all reported cases of corporate fraud in companies with more than $750 million of assets between 1996 and 2004, the researchers found found that the number of employee whistleblowers had actually fallen after Sarbanes-Oxley came into effect. The proportion of employee whistleblowers went from 21 per cent to 16 per cent, suggesting that the law was not effective. In other words, employees don't really feel that protected by Section 301.

The academics write: "One possible explanation is that protecting the whistleblower's current job is a small reward given the extensive ostracism whistleblowers face. Another explanation could be that many firms either go bankrupt or are bought up after revelation of fraud. As a result, job protection in the pre-existing firm is but a small reward.''

There are other interesting findings in the study.

Prior to Enron, auditors accounted for just 9.6 per cent of frauds detected. Post-Enron, it went up to 16.9 per cent. But the reason for the increase, the authors say, is not clear:

"What this study cannot determine is which aspect of the post 2002 reforms has triggered a change in auditors' behavior. Is it the severing of the consulting business with their clients, the effect of the demise of Arthur Andersen, the effect of required increased professional skepticism by auditors, or the increased awareness of frauds arising from implementation of section 404 and internal controls? In other words, is this a permanent change or a temporary reaction to an event that made the risk of bad auditing salient, reaction that will subside with time? Only time will tell."

The other interesting part is that the Security and Exchange Commission detected only 6 per cent of fraud cases between 1996 and 2004. And when you expand the number of mandated players to include auditors and industry regulators, they only pick up just over 50 per cent of cases.

This is not to say that Sarbanes-Oxley is useless. But the study is further evidence that it doesn't really achieve everything it set out to do. And when it comes to protecting whistleblowers, it's about as useful as a bump on a log.