The impact of CEO narcissism on modified audit opinions

Mojtaba Golmohammadi Shuraki and Omid Pourheidari

Accounting Research Journal, 2026, vol. 39, issue 2, 220-242

Abstract: PurposeManagers’ personality traits shape financial reporting quality, but their impact on the audit report remains unclear. This study aims to examine the impact of CEO narcissism on modified audit opinions and investigate whether corporate governance and auditor quality moderate this effect.Design/methodology/approachUsing a descriptive-correlational design, this study analyzes a panel of 1,380 firm-year observations from 138 companies on the Tehran Stock Exchange (2014–2023). Regression models are used to test the direct and moderated relationships.FindingsThe results indicate that CEO narcissism has a statistically significant positive impact on the modified audit opinions. Importantly, the quality of the independent auditor and the independence of the audit committee play a crucial moderating role by reducing the strength of this relationship. In addition, internal corporate governance mechanisms, including board independence, institutional ownership and ownership concentration, also directly impact modified audit opinions. However, they do not significantly alter the link between CEO narcissism and modified audit opinions. In practice, these findings emphasize the critical importance of companies selecting high-quality auditors as a key mechanism to mitigate the potential for biased audit opinions arising from CEO narcissism.Originality/valueAs the first study to empirically link CEO personality to the final audit opinion, this paper extends the literature’s focus from financial reporting quality to the outcome of auditor judgment. It demonstrates that while narcissistic leaders elevate audit risk, this can be effectively contained by strong external governance. These findings have significant implications for boards, regulators, investors and the audit profession, informing risk assessment processes and the design of effective oversight structures.

Keywords: CEO narcissism; Modified audit opinion; Auditor type; Audit committee independence; Board independence; Institutional ownership; Ownership concentration (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:eme:arjpps:arj-04-2025-0139

DOI: 10.1108/ARJ-04-2025-0139

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