Post by Università Bocconi

We often think of #auditing as a purely technical process governed by rules and standards. But what if the personality of the auditor also plays a role? Behind every audit judgment, there is also a person with their own decision-making style and character traits. A new study of the UK market shows that the #narcissism of audit partners can influence how #auditors evaluate financial statements, set fees, and manage the delicate balance between professional rigor and commercial pressures. This is the starting point of the research by Bocconi Researcher with Tenure Mara Cameran, Peiwei Lyu from Stirling Business School at the University of Stirling, and Pietro Perotti from the School of Management at the University of Bath. Accounting research has increasingly shifted attention from audit firms to individual partners. #Auditing is not a mechanical process. It relies on judgment, risk assessment, and discretion, all of which may be shaped by personal characteristics. The authors focus on #narcissism, a stable personality trait associated with self-inflation and a desire for recognition, and examine how it affects audit outcomes in the UK market. This brings a behavioral lens to #AuditQuality and professional decision making. Using more than 3,000 observations of UK-listed companies between 2010 and 2016, the study measures narcissism through the size of the audit partner’s signature on annual reports, a proxy commonly used in psychological research. The findings show that higher narcissism is associated with greater tolerance for earnings management. More narcissistic auditors are more willing to accept aggressive accounting choices as long as they remain within formal standards. However, this flexibility does not translate into a higher likelihood of material misstatements or restatements. Overall, the relationship between narcissism and audit quality is negative but modest. The study also uncovers a clear effect on #AuditFees. More narcissistic audit partners tend to charge lower fees per engagement, with an average reduction of about 4 percent for a one standard deviation increase in narcissism. This appears to be a strategic choice. By lowering fees, narcissistic partners attract more listed clients and expand their portfolios, prioritizing visibility and influence over higher margins on individual assignments. #Context, however, matters. Unlike prior evidence from Asian markets, where narcissism has been linked to poorer audit outcomes, the UK results suggest a more nuanced dynamic. In a competitive and increasingly commercialized environment, a more confident and risk tolerant form of narcissism may produce a pragmatic balance rather than outright audit failure. The findings highlight the importance of #BehavioralAccounting. Even in highly regulated professions, individual decision styles shape outcomes. Understanding how personality interacts with institutional context is essential for interpreting how auditing works in practice.