There is no ‘I’ in team: An analysis of audit partner narcissism from the team aspect

Abstract

We investigate the relation between the degree of audit partner narcissism and income‐increasing earnings management of client firms at both the individual and team levels of analysis in Japan. With the use of the size of audit partner signatures as a proxy for the degree of narcissism, we find that audit partner narcissism is negatively related to income‐increasing earnings management. Our team level of analysis shows that audit team partner narcissism is also negatively related to income‐increasing earnings management. When an audit engagement team has more than one narcissistic partner, we establish that narcissism is only effective in constraining income‐increasing earnings management if the lead partner in the team is narcissistic. Furthermore, our team level of analysis shows that the size of the engagement team has a moderating effect on lead partner narcissism, suggesting that narcissistic leaders tend to behave differently in larger teams.