The purpose of this paper is to analyse auditors’ experience with corporate psychopaths in their client management.
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.
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.
The findings confirm 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.
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.
This is the first research to address auditors’ experience with corporate psychopaths. It adds value by confirming the relevance of the topic for practice and research.
