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.
ASJC Scopus subject areas