The Importance of Partner Narcissism to Audit Quality: Evidence from Taiwan

Ting-Kai Chou, Jeffrey Pittman, Zili ZhuangAccounting审计UTD24

The Accounting Review2021-02-18National Cheng Kung University; Memorial University of Newfoundland; Virginia Tech; Chinese University of Hong KongDOI

Citations66

ABSTRACT Relying on the size of partner signatures in audit reports in Taiwan to measure their narcissism, we find that audit quality rises with partner narcissism. Our analysis also implies that changes in audit quality are positively associated with changes in partner narcissism stemming from mandatory partner rotation. We also find that the impact of partner narcissism on audit quality only manifests when auditor independence is more likely to be compromised, although it does not vary with engagement complexity. These results suggest that partner narcissism improves audit quality mainly through increased auditor independence, rather than auditor competence. Additionally, we document that although partner narcissism has no perceptible impact on the incidence of Type I going concern reporting errors, it is negatively associated with the probability of making a Type II error, implying that more narcissistic partners are less likely to succumb to client pressure to issue opportunistic reports. Data Availability: Data are available from public sources as identified in the text. JEL Classifications: M40; M42.

NarcissismAuditQuality auditPsychologyAuditor independenceQuality (philosophy)Social psychologyBusinessAccountingJoint auditInternal auditAuditing, Earnings Management, Governance