Auditor Perceptions of Client Narcissism as a Fraud Attitude Risk Factor

31 Pages Posted: 12 Oct 2012 Last revised: 14 May 2014

See all articles by Eric N. Johnson

Eric N. Johnson

University of Wyoming

John R. Kuhn

University of South Florida Polytechnic

Barbara Apostolou

West Virginia University

John M. Hassell

Indiana University Kelley School of Business Indianapolis

Date Written: October 12, 2012

Abstract

Auditing standards prescribe that the auditor should consider client management’s attitude toward fraud when making fraud risk assessments. However, little guidance is provided in the auditing standards or the existing fraud literature on observable indicators of fraud attitude. We test 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. We administered an experiment to 101 practicing auditors from one international public accounting firm who assessed fraud risk based on a scenario in which client manager narcissism (attitude) and fraud motivation were each manipulated at two levels (low and high). Our results show that narcissistic client behavior and fraud motivation are significantly and positively related to auditors’ overall fraud risk assessments. Implications of these findings for further research and the auditing profession are discussed.

Keywords: fraudulent financial reporting, attitude/rationalization, risk assessment, narcissism

JEL Classification: M41

Suggested Citation

Johnson, Eric N. and Kuhn, John R. and Apostolou, Barbara and Hassell, John M., Auditor Perceptions of Client Narcissism as a Fraud Attitude Risk Factor (October 12, 2012). Auditing: A Journal of Practice & Theory, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2161108

Eric N. Johnson (Contact Author)

University of Wyoming ( email )

Department of Accounting and Finance
College of Business
Laramie, WY 82071
United States

HOME PAGE: http://www.uwyo.edu/accounting/accounting-faculty-and-staff-directory/Eric%20Johnson.html

John R. Kuhn

University of South Florida Polytechnic ( email )

3433 Winter Lake Road
Lakeland, FL 33803 33770
United States

Barbara Apostolou

West Virginia University ( email )

PO Box 6025
Morgantown, WV 26506
United States

John M. Hassell

Indiana University Kelley School of Business Indianapolis ( email )

801 W. Michigan Street
Indianapolis, IN 46202-5151
United States

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