The Effects of Auditor Narcissism and Perceptions of Client Agentic and Communal Traits on Judgments of Financial Fraud Risk

• In Event: Dark Triad in Accounting

Abstract

In this study, we examine experimentally the influence of auditor narcissism and auditors’ impressions of a hypothetical client CFO’s narcissism on judgments of fraud risk following a simulated interpersonal exchange. One hundred twenty audit seniors from Big 4 and other international audit firms participated in the study.

Consistent with contemporary integrative interpersonal theory, we find that fraud risk judgments of a high agency-low communion (high narcissist) CFO by more narcissistic auditors are significantly lower compared to judgments by less narcissistic auditors. The same auditor narcissism-based differences are observed in fraud risk judgments of a low agency-high communion (low narcissist) CFO.

Our results demonstrate that auditor narcissism is associated with systematic differences in fraud risk judgments related to auditor inferences of the CFO’s agency and communion. Implications of narcissism-based differences in auditors’ fraud risk judgments for audit practice, audit regulators, and audit judgment research are discussed.

Authors

• Eric N Johnson, University of Wyoming

• D. Jordan Lowe, Arizona State University - Tempe

• Philip M J Reckers, Arizona State University - Tempe