Auditors’ experience with corporate psychopaths

Publication Date03 Oct 2016
DOIhttps://doi.org/10.1108/JFC-05-2015-0026
Pages870-881
AuthorKim Klarskov Jeppesen,Christina Leder
SubjectAccounting & Finance,Financial risk/company failure,Financial crime
Auditors’ experience with
corporate psychopaths
Kim Klarskov Jeppesen
Department of Accounting and Auditing, Copenhagen Business School,
Frederiksberg, Denmark, and
Christina Leder
Sampension, Hellerup, Denmark
Abstract
Purpose – The purpose of this paper is to analyse auditors’ experience with corporate psychopaths in
their client management.
Design/methodology/approach The research was conducted as a survey among Danish
state-authorized auditors, to which 179 auditors responded, representing 9 per cent of the total
population.
Findings – Of the participating auditors, 69 per cent had experienced corporate psychopaths in their
client management and 70 per cent of these had experienced more than one case. In addition, 43 per cent
of the auditors who had experienced psychopathic managers reported that they had committed fraud.
The vast majority of cases were detected in the execution and completion phases of the audit and
resulted in increased professional scepticism, the use of more experienced auditors and the requirement
for more and better audit evidence.
Research limitations/implications – The ndings conrm that corporate psychopaths actually
exist and are a phenomenon worthy of research attention in areas such as accounting, auditing, internal
control, fraud investigation, performance management and human resource management.
Practical implications – As auditors are likely to come across corporate psychopaths from time to
time in their careers, awareness of this type of risk needs to be increased and better integrated into the
risk assessment in audit planning. Auditing standards relating to fraud also need to be updated
according to the latest developments in fraud theory.
Originality/value This is the rst research to address auditors’ experience with corporate
psychopaths. It adds value by conrming the relevance of the topic for practice and research.
Keywords Fraud triangle, Fraud theory, Auditing, Fraud, Corporate psychopaths,
Financial statement fraud
Paper type Research paper
1. Introduction
The purpose of this paper is to analyse auditors’ experiences with corporate
psychopaths in their client management. A number of recent management frauds may
be ascribed to corporate psychopaths in management positions and awareness of this
type of personality disorder has informed recent developments in fraud detection
models for auditors. However, little is known about the actual occurrence of
psychopaths in management positions and the way they interact with their auditors.
The paper seeks to ll parts of this gap in knowledge by investigating auditors’
experience with corporate psychopaths. Auditors interact with top management in
almost all major corporations, auditing the results of managements’ work as
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1359-0790.htm
JFC
23,4
870
Journalof Financial Crime
Vol.23 No. 4, 2016
pp.870-881
©Emerald Group Publishing Limited
1359-0790
DOI 10.1108/JFC-05-2015-0026

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