The Role of Auditor Narcissism in Auditor-Client Negotiations: Evidence from China

Posted: 18 Sep 2019

See all articles by Bryan K. Church

Bryan K. Church

Georgia Institute of Technology - Accounting Area

Narisa Tianjing Dai

University of International Business and Economics - Business School

Xi (Jason) Kuang

Georgia Institute of Technology - Scheller College of Business

Xuejiao Liu

University of International Business and Economics

Date Written: September 3, 2019

Abstract

This paper reports the results of three studies (archival, experimental and qualitative) designed to examine the effects of auditor narcissism on auditor-client negotiations in China. We contend that narcissistic characteristics fuel auditors’ competitiveness and embolden them to stand firm in negotiations, potentially lengthening the negotiation process but leading to more conservative negotiation outcome. As predicted, our archival results suggest that auditor narcissism is positively associated with audit delay and negatively associated with clients’ absolute and positive discretionary accruals. Our experimental results document that narcissistic auditors are more likely to be involved in negotiations that reach an impasse or take longer to resolve and that narcissistic auditors negotiate reported asset values that reflect less aggressive reporting choices. Our qualitative results from field interviews with practicing audit partners corroborate our archival and experimental findings. Overall, the data collected using three different research methods yield consistent results in support of our theory. Our findings shed light on factors that influence audit efficiency and quality in China. We discuss the key cultural and contextual differences between China and the West as well as the implications of these differences for future research.

Keywords: narcissism, auditor-client negotiations, audit delay, discretionary accruals

Suggested Citation

Church, Bryan K. and Dai, Narisa Tianjing and Kuang, Xi (Jason) and Liu, Xuejiao, The Role of Auditor Narcissism in Auditor-Client Negotiations: Evidence from China (September 3, 2019). Contemporary Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3450742

Bryan K. Church

Georgia Institute of Technology - Accounting Area ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States
404-894-3907 (Phone)
404-894-6030 (Fax)

Narisa Tianjing Dai

University of International Business and Economics - Business School ( email )

10, Huixin Dongjie
Changyang District
Beijing, Beijing 100029
China
0086-1064493525 (Phone)

Xi (Jason) Kuang (Contact Author)

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St., NW
Atlanta, GA 30308-1149
United States

Xuejiao Liu

University of International Business and Economics ( email )

Beijing, Beijing
China

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