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    Auditor Perceptions of Client Narcissism as a Fraud Attitude...
    research summary posted June 7, 2014 by Jennifer M Mueller-Phillips, tagged 06.0 Risk and Risk Management, Including Fraud Risk, 06.01 Fraud Risk Assessment, 06.04 Management Integrity, 10.0 Engagement Management, 10.04 Interactions with Client Management 
    Auditor Perceptions of Client Narcissism as a Fraud Attitude Risk Factor
    Practical Implications:

    The results of this study offer initial evidence that manager narcissism is an observable measure of elevated fraud risk. These findings have clear implications for audit practice. The results suggest that auditors are aware of the link between client narcissism and increased fraud attitude risk. Public accounting firms should emphasize the linkage between specific client manager personality traits and the increased likelihood of fraud-related behaviors in fraud risk assessment training. This study may also be useful to standard setters and auditing firms as a means to improve professional guidance regarding how to assess fraud attitude and the resulting effect on auditors’ fraud risk assessments.  


    Johnson, E. N., J. R. Kuhn, B. A. Apostolou, and J. M. Hassell. 2013. Auditor Perceptions of Client Narcissism as a Fraud Attitude Risk Factor. Auditing 32 (1).

    attitude/rationalization; fraudulent financial reporting; narcissism; risk assessment
    Purpose of the Study:

    Despite increased emphasis on fraud detection in the auditing standards since the passage of the Sarbanes-Oxley Act of 2002, fraudulent financial reporting continues to be a serious concern. Auditing standards state that the auditor should consider client management’s attitude toward fraud when making fraud risk assessments. Very little guidance, however, is provided in the auditing standards or existing fraud literature on observable indicators of fraud attitude. This study tests whether observable indicators of narcissism, a personality trait linked to unethical and fraudulent behavior, is viewed by auditors as an indicator of increased fraud attitude risk. 

    Design/Method/ Approach:

    The authors developed an audit judgment case scenario that included specific indications of client fraud attitude and fraud motivation. Narcissism and motivation were each manipulated at two levels (high or low) in a 2 X 2 design. Participants selected were 101 practicing auditors from several U.S. offices of a large international public accounting firm. The data was collected in an experimental setting, where the participants were randomly assigned to one of four possible experimental conditions and individually completed the experimental materials. Responses were gathered through a combination of: (1) “live” administration at firm training events attended by the researchers; and (2) mail responses, where the managing partners of four firm offices agreed to distribute questionnaires and coordinate their completion and return. The overall goal was an initial experiment of client narcissism as a fraud risk factor in an audit context. 

    • Results indicate a narcissism effect, with significantly higher assessments of fraud risk when a client manager was described as exhibiting narcissistic characteristics. 
    • Auditors assessed fraud risk as significantly higher in the presence of motivations for the client manager to commit fraud.
    • Narcissism did not interact with fraud motivation in influencing auditor fraud risk judgments; high levels of either fraud attitude risk or fraud motivation risk were sufficient to increase auditors’ fraud risk assessments.
    Engagement Management, Risk & Risk Management - Including Fraud Risk
    Fraud Risk Assessment, Interactions with Client Management, Management Integrity

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