Professional Auditing Research

Professional Auditing Research

Audit Partner Narcissism and Audit Fees: Considering the Role of Tenure and Busyness

Document Type : Original Article

Authors
Seyed Aliakbar Taymouriyan 1
Mehdi Maranjory 2
Razieh Alikhani 3
Nemat Rostami 4
1 Ph.D. Student of Accounting, Chalous Branch, Islamic Azad University, Chalous, Iran.
2 Associate professor.Chalous Branch, Islamic Azad University, Chalous, Iran
3 Assistant Professor of Accounting, Chalous Branch, Islamic Azad University, Chalous, Iran.
4 Assistant Professor of Accounting, Chalous Branch, Islamic Azad University, Chalous, Iran
10.22034/jpar.2024.2009536.1206
Abstract
The purpose of this research is to investigate the relationship between audit partners' narcissism and audit fees, considering the role of tenure and busyness of the audit partner. This research is applied in terms of purpose, and in terms of method is correlation and Ex-Post Facto. The statistical population of this research was the firms accepted in Tehran Stock Exchange, during the years 1394 to 1400, and the data of 82 firms were selected by the systematic elimination method, and the hypotheses were established using multiple regressions for panel data, using the fixed effects method, through EViews software was tested. The results of the research showed that the narcissism of the first partner signing the audit report has no significant relationship with the audit fee and the tenure and busyness of this partner has no effect on this relationship. But the second partner's narcissism is positively and significantly related to audit fees. Between tenure and busyness of this partner, only tenure has a reducing effect on these relationship.The characteristics of the second audit partner are more decisive on the pricing of audit services than the first partner. However, audit institutions, knowing the level of narcissism of their partners, in addition to reducing the costs spent on a narcissistic partner audit project and the possibility of increasing their earnings can increase their competitive advantage by reducing the price of the services provided.
Keywords
Audit Partner Narcissism
Audit Fees
Audit Partner Tenure
Audit Partner Busyness

Subjects

پاشازاده کهق، معصومه؛ علی نژادساروکلائی، مهدی؛ محمدی، احمد؛ و بادآور نهندی، یونس. (1401). طراحی مدل خودشیفتگی حسابرس در محیط کار حسابرسی. تحلیل بازار سرمایه, 2(3): 183-213.
لطفی جو، نشمین؛ بنی مهد، بهمن؛ و وکیلی فرد، حمیدرضا. (1402). خودشیفتگی حسابرس و اظهارنظر مقبول حسابرسی. پژوهش‌های حسابرسی حرفه‌ای،3(11): 64-81.
مشایخ، شهناز؛ حکمت، هانیه؛ و جمشیدی، پروانه. (1403). بررسی اثر خوانایی گزارشهای مالی بر تاخیر گزارش حسابرسی، بندهای توضیحی و حق الزحمه حسابرسی. پژوهش‌های حسابرسی حرفه‌ای،5(17): 36-57.
Akers, M. D., Giacomino, D. E. & Weber, J. (2014). Narcissism in Public Accounting Firms. Accounting and Finance Research, 3(3): 170–178.
Almer, E. D., & Kaplan, S.E. (2002). The Effects of Flexible Work Arrangements on Stressors, Burnout, and Behavioral Job Outcomes in Public Accounting. Behavioral Research in Accounting, 14 (1): 1-34.
Azizkhani, M., Monroe, G.S., & Shailer, G. (2013). Audit Partner Tenure and Cost of Equity Capital. Auditing: A Journal of Practice & Theory, 32(1): 183-202.
Ball, F., Tyler, J. & Wells, P. (2015). Is Audit Quality Impacted by Auditor Relationships? Journal of Contemporary Accounting & Economics, 11(2): 166-181.
Bamber, E. M., & Iyer, V. M. (2007). Auditors’ Identification with Their Clients and its Effect on Auditors’ Objectivity. Auditing: A Journal of Practice & Theory, 26(2): 1-24.
Blair, C. A., Hoffman, B.J. & Helland, K. R. (2008). Narcissism in Organizations: a Multisource Appraisal Reflects Different Perspectives. Human Performance, 21(3): 254-276
Cameran, M., and Lyu, P., & Perotti, P. (2022). The Consequences of Audit Partner Narcissism: Evidence From the UK Market. Available at SSRN: https://ssrn.com/abstract=4109142
Carcello, J. V. & Nagy, A. L. (2004). Audit Firm Tenure and Fraudulent Financial Reporting, Auditing: A Journal of Practice & Theory, 23 (2): 57-69.
Carey, P., & Simnett, R. (2006). Audit Partner Tenure and Audit Quality. The Accounting Review, 81(3): 653-676.
Catanach, A., & Walker, P. (1999). The International Debate over Mandatory Auditor Rotation: A Conceptual Research Framework. Journal of International Accounting, Auditing & Taxation, 8(1): 43-66.
Chen, C-Y., Lin, C-j., & Lin, Y-C. (2008). Audit Partner Tenure, Audit Firm Tenure, and Discretionary Accruals: Does Long Auditor Tenure Impair Earnings Quality? Contemporary Accounting Research, 25(2): 415-445.
Chen, J., Dong, W., Han, H., & Zhou, N. (2020). Does Audit Partner Workload Compression Affect Audit Quality? Forthcoming, European Accounting Review, 29(5): 1021-1053.
Cheng, Y., Haynes, C. M. & Yu, M. D. (2021). The Effect of Engagement Partner Workload on Audit Quality. Managerial Auditing Journal, 36(8): 1068-1091.
Choi, J.-H., Kim, J.-B., Liu, X., & Simunic, D. A. (2008). Audit Pricing, Legal Liability Regimes, and Big 4 Premiums: Theory and Cross-Country Evidence. Contemporary Accounting Research, 25(1): 55-99.
Chou, T-K., Pittman, J. A. & Zhuang, Z. (2021). The Importance of Partner Narcissism to Audit Quality. The Accounting Review, 96(6): 103–127.
Church, B.K., Dai, N.T., Kuang, X. & Liu, X. (2020), The Role of Auditor Narcissism in Auditor‐Client Negotiations: Evidence from China. Contemporary Accounting Research, 37(3): 1756-1787.
Cragun, O. R., Olsen, K. J., & Wright, P. M. (2020). Making CEO Narcissism Research Great: A Review and Meta-Analysis of CEO Narcissism. Journal of Management, 46(6), 908–936.
Doty, J. R. (2011). Rethinking the Relevance, Credibility and Transparency of Audits - Speech by PCAOB Chairman James R. Doty to SEC and Financial Reporting Institute 30th Annual Conference, June 2. Available: http://pcaobus.org/News/Speech/Pages/06022011_DotyKeynoteAddress.aspx.
Duong, H, K., Gotti, G., Stein, M. T., & Chen, A. (2022). Code of Ethics Quality and Audit Fees. Journal of Accounting and Public Policy, 20(C): 107001.
Fama, E. F. & Jensen, M. C. (1983a). Separation of Ownership and Control. Journal of Law and Economics, 26(2): 301-325.
Fama, E. F. & Jensen, M. C., (1983b). Agency Problems and Residual Claims. Journal of Law and Economics, 26(2): 327-349.
Farwell, L., & Wohlwend-Lloyd, R. (1998). Narcissistic Processes: Optimistic Expectations, Favorable Self-Evaluations, and Self-Enhancing Attributions. Journal of Personality, 66(1): 65–83.
Firth, M. A., Rui, O. M. & Wu, X. (2012). How do Various forms of Auditor Rotation Affect Audit Quality? Evidence from China. The International Journal of Accounting, 47(1): 109-138.
Foster, J. D., Reidy, D. E., Misra, T. A., & Goff, J. S. (2011). Narcissism and Stock Market Investing: Correlates And Consequences of Cocksure Investing. Personality and Individual Differences, 50(6): 816–821.
García-Blandon, J., Argilés-Bosch, J. M., & Ravenda, D. (2020). Learning by Doing? La experiencia en auditoría del socio auditor y la calidad de los servicios de auditoría: Learning by Doing? Partners Audit Experience and the Quality of Audit Services. Revista de Contabilidad - Spanish Accounting Review, 23(2): 197–209.
Goodwin, J., & Wu, D. (2016). What is the Relationship between Audit Partner Busyness and Audit Quality? Contemporary Accounting Research, 33(1): 341–377.
Gul, F. A., Ma, S. M. & La, K. (2017). Busy Auditors, Partner-Client Tenure, and Audit Quality: Evidence from an Emerging Market. Journal of International Accounting Research, 16 (1): 83–105.
Habib, A., Bhuiyan. M. B. U., & Sun, X. (2019). Audit Partner Busyness and Cost of Equity Capital. International Journal of Auditing, 23 (1): 57– 72
Hoitash, R., Markelevich, A., & Barragato, A. C. (2007). Auditor Fees and Audit Quality. Managerial Auditing Journal, 22(8): 761-786.
Hopwood, A., McKeown, J. & Mutchler. J. (1989). A Test of the Incremental Explanatory Power of Opinions Qualified for Consistency and Uncertainty. The Accounting Review 64(1): 28-48.
Hsieh, T-S., Kim, J-B.,‎ Wang,‎ R.‎ R.,‎ & Zhihong,‎W.‎ (2020). ‎Seeing‎ Is‎ Believing?‎ Executives’‎ Facial‎ Trustworthiness, Auditor Tenure, and Audit Fees. Journal of Accounting and Economics, 69(1): 101260.
Hüffmeier, J., Freund, P. E., Zerres, A., Backhaus, K., & Hertel. G. (2014). Being Tough or Being Nice? A Meta-Analysis on the Impact of Hard- and Softline Strategies in Distributive Negotiations. Journal of Management, 40(3): 866–892.
Ismail, R.A., Zaki, O. & Abou-El-Sood, H. (2023). Executives' Narcissism and Decision Making: Reviewing 20 Years of Accounting Literature. Journal of Humanities and Applied Social Sciences, 5(2): 120-143.
Johnson, V. E., Khurana, I. K., & Reynolds, J. K. (2002). Audit-Firm Tenure and the Quality of Financial Reports. Contemporary Accounting Research, 19(4): 637-660.
Kerckhofs, L., Vandenhaute. M-L., & Hardies, K. (2022). Partner Narcissism in a Private Market Setting: Consequences for Audit Reporting Decisions and Audit Pricing. Available at SSRN: https://ssrn.com/abstract=4236397
Lai, K. M. Y, Sasmita, A., Gul, F. A., Foo, Y. B. & Hutchinson, M. (2018). Busy Auditors, Ethical Behavior, and Discretionary Accruals Quality in Malaysia. Journal of Business Ethics, 150(4): 1187-1198.
Lennox, C., X. Wu, & Zhang, T. (2014). Does Mandatory Rotation of Audit Partners Improve Audit Quality? The Accounting Review 89(5): 1775–1803.
Lo, A. W. Y., Lin, K. Z., & Wong, R. M. K. (2022). Does Availability of Audit Partners Affect Audit Quality? Evidence From China. Journal of Accounting, Auditing & Finance, 37(2), 407–439.
Lotfiju, N., Banimahd, B., & Vakilifard, H. (2023). The role of Auditor’s Narcissism on Unqualified Audit Opinion, Journal of Professional Auditing research, 3(11): 64-81.)in persian)
Pashazadeh Kahaq, M., Alinejad Saroklai, M., Mohamadi, A., & Badavar Nahandi, Y. (2025). Designing the Auditor's Narcissism Model in the Auditing Work Environment, Journal of Capital Market Analysis, 2(3): 183-213.)in persian)
Maccoby, M. (2003). The Productive Narcissist. Broadway Books, New York.
Mashayekh, SH., Hekma, H., & Jamshidi, P. (2025). Examining the effect of financial reports readability on the delay of the audit report, audit report explanatory paragraphs and audit fees, Journal of Professional Auditing research, 5(17): 36-57.)in persian)
Manry, D., Mock, T., & Turner, J. (2008). Does Increased Partner Tenure Reduce Audit Quality? Journal of Accounting, Auditing & Finance, 23(4): 553-572.
Maranjory, M. (2024). Environmental Uncertainty and R&D Investment: Moderator role Of Product Market Competition, International journal of finance and managerial accounting, 9(33): 129-138.
Mauritz, C., Nienhaus, M. & Oehler, C. (2023). The Role of Individual Audit Partners for Narrative Disclosures. Review of Accounting Studies, 28(1):1-44.
Mnif, Y. & Cherif, I. (2022). Audit Partner Workload, Gender and Audit Quality. Journal of Applied Accounting Research, 23(5): 1047-1070.
Mohammadi, H., Salehi, M., Arabzadeh, M. & Ghodrati, H. (2021). The Effect of Auditor Narcissism on Audit Market Competition. Management Research Review, 44(11): 1521-1538.
Monroe, G. & Hossain, S. (2013). Does Audit Quality Improve after the Implementation of Mandatory Audit Partner Rotation? Accounting and Management Information Systems, 12 (2): 263–279.
Myers, J. N., Myers, L. N., & Omer, T. C. (2003). Exploring the Term of the Auditor-Client Relationship and the Quality of Earnings: A Case for Mandatory Auditor Rotation? The Accounting Review, 78(3): 779–799.
Nevicka, B., Ten Velden, F., De Hoogh, A., & Van Vianen. A. (2011). Reality at Odds with Perceptions: Narcissistic Leaders and Group Performance. Psychological Science 22(10): 1259- 1264.
Ocak, M. (2018). The Impact of Auditor Education Level on the Relationship between Auditor Busyness and Audit Quality in Turkey. Cogent Business & Management, 5(1): 1-20.
Rahmina, L. Y., & Agoes, S. (2014). Influence of Auditor Independence, Audit Tenure, and Audit Fee on Audit Quality of Members of Capital Market Accountant Forum in Indonesia. Procedia - Social and Behavioral Sciences, 164: 324-331.
Rapier, M. L. (2005). An Interview Study of Narcissistic Executives: Piercing The Corporate Veil of Narcissism In The Workplace. Thesis Paper. Saybrook Graduate School and Research Center.
Raskin, R., & Howard, T. (1988). A Principal-Components Analysis of the Narcissistic Personality Inventory and Further Evidence of Its Construct Validity. Journal of Personality and Social Psychology 54(5): 890-902.
Salehi, M., Dalwai, T. & Arianpoor, A. (2023). The Impact of Narcissism, Self-Confidence and Auditor’s Characteristics on Audit Report Readability. Arab Gulf Journal of Scientific Research, 41(2): 202-223.
Salehi, M., Rouhi, S., Usefi Moghadam, M. and Faramarzi, F. (2022). Managers' and Auditors' Narcissism on the Management Team's Stability and Relative Corporate Performance. International Journal of Productivity and Performance Management, 71(4): 1490-1514.
Sanoran, K.(L). (2020). What Matters in Cost of Debt: Audit Partner Public-Client Specialization or Busyness? Managerial Auditing Journal, 35(9): 1379-1399.
Shang, R., Wang, Z. (A.), & Zu, Y. (2023). Manager Narcissism, Target Difficulty, and Employee Dysfunctional Behavior. Contemporary Accounting Research, 40(3): 1795-1822.
Singh, H., Sultana, N., Islam, A., & Singh, A. (2022). Busy Auditors, Financial Reporting Timeliness and Quality. The British Accounting Review, 54(3): 101080
Sundgren, S., & Svanstrom, T. (2014). Auditor-in-Charge Characteristics and Going-Concern Reporting. Contemporary Accounting Research, 31(2): 531–550.
Suzuki, K. & Takada, T. (2016). Do Client Knowledge and Audit Team Composition Mitigate Partner Workload?, Paper presented at the 2017 American Accounting Association Auditing Section Midyear Meeting Maslach & Jackson
Sweeney, J. ‎T., ‎& ‎Summers,‎ S. ‎L. ‎(2002).‎The ‎Effect‎ of‎ the‎ Busy‎ Season‎Workload‎  on‎ Public‎ Accountants’‎ Job Burnout. Behavioral Research in Accounting 14(1): 223-245.
Takada, T., Lau, D., Casterella, J. R., & Wong, N. (2021). There Is No ‘I’ in Team: An Analysis of Audit Partner Narcissism from the Team Aspect. International Journal of Auditing, 25(3): 751–768.
Tran, T. T. G., Nguyen, T. T., Pham, B. T. N. & Tran, P. T. T. (2023). Audit Partner Tenure and Earnings Management: Evidence from Vietnam. Journal of Financial Reporting and Accounting, In Press.
Vazire, S., Naumann, L. P., Rentfrow, P. J. & Gosling, S.D. (2008). Portrait of a Narcissist. Manifestations of Narcissism in Physical Appearance. Journal of Research in Personality, 42(6): 1439–1447.
Wan Hussin, W. N. Bamahros, H. M., & Shukeri, S. N. (2018). Lead Engagement Partner Workload, PartnerClient Tenure and Audit Reporting Lag: Evidence from Malaysia. Managerial Auditing Journal, 33(3): 246-266.
Zerni, M. (2012). Audit Partner Specialization and Audit Fees: Some Evidence from Sweden. Contemporary Accounting Research, 29(1): 312–340.