Auditor Narcissism and Auditor-Client Negotiations

• In Event: Auditor-Client Interactions and Negotiations

Abstract

This paper reports the results of an experiment designed to examine the effect of auditor narcissism on auditor-client interactions. We contend that narcissistic characteristics fuel auditors’ competitiveness and embolden them to stand firm in negotiations, potentially influencing outcomes in a desired way. Our experiment includes auditor-client dyads who negotiate over a reported asset value. We categorize participants’ narcissism as high (H) or low (L), based on a pre-experiment narcissistic personality survey, and systematically match them creating auditor-client dyads. We find that H auditors are more likely to be involved in negotiations that reach an impasse or take longer to resolve than L auditors. Importantly, H auditors negotiate reported asset values that are more in line with preferred outcomes (conservative reporting choices) than L auditors. Consistent with our experimental results, supplemental analyses using data collected from naturally-occurring settings suggest that auditor narcissism is positively associated with audit delay and negatively associated with clients’ absolute discretionary accruals. Our findings have implications as to the potential benefits and costs of auditor narcissism on the audit process and audit outputs.

Authors

• Bryan Church, Georgia Institute of Technology

• Narisa Tianjing Dai, University of International Business and Economics

• Xuejiao Liu, University of International Business and Economics

• Jason Kuang, Georgia Institute of Technology