• New research: Accounting students are not generally psychopaths but some slip through

    By • Jun 17th, 2016 • Category: Audit Firm Management, Your Career

     

    New academic research says accounting students are less likely to be psychopaths who will commit fraud than other majors but surprising admissions by some suggest a reason to be wary.

    Accounting majors exhibit psychopathic tendencies less often than everyone else, on average, but psychopaths are pursuing accounting degrees. That’s what Charles D. Bailey, a professor of accounting at the University of Memphis, was surprised to find when he surveyed students all over the country for new research. Some students admitted to attitudes and beliefs nearly off the scale for psychopathy. Those are the students that regulators, and the profession, should be looking for when measuring the risk of fraud at companies and in audit firms, says Bailey.

    About 1% of the general population, and about 4% of CEOs, could be considered clinical psychopaths, according to research by Dr. Robert Hare. The “dark triad” of personality factors also includes narcissism and Machiavellianism, which share some features with psychopathy such as self-centeredness and opportunism that can enable fraud, although psychopathy seems the most dangerous, according to Bailey.

    In his working paper under consideration for publication, “Psychopathy and Accounting Students’ Attitudes towards Unethical Behaviors,” Bailey says the psychopathy scores are consistent across university grade levels, suggesting that no winnowing-out of the bad eggs occurs over time. His anonymous online survey obtained responses from 256 accounting majors at the junior, senior, and graduate level attending universities across the United States in April of 2013.

    Psychopaths know right from wrong but do not care, a form of radical rationality. Psychopaths also lack a conscience. Psychopaths “do not construe personal identities in moral terms” and are unconcerned with being, or being perceived as, moral or ethical individuals, according to another study on the subject.

    Accounting students self-select to be corporate watchdogs and to perform a public duty to the capital markets as external auditors and those who prepare financial disclosures for public companies. The accounting profession is now very focused on ethics training for those still in school and at the beginning of their careers, in an effort to reassert professionalism and professional skepticism in the auditing profession and to better prevent and detect corporate fraud.

    Bailey’s survey has twenty-six numbered questions beginning with actions that managers might choose to take to achieve earnings management or balance sheet window-dressing, with the assumption that the incentives to do so were strong and, if the acts are questionable or illegal, the “chance of detection and punishment is very small.” These acts range from innocuous like working overtime to maximize year-end shipments to serious such as burying scrap costs, having a supplier delay billing, and postponing a necessary write-off.

    Questions 9 through 24 are taken from Levenson’s Self-Reported Psychopathy Scale which measures primary psychopathy. Clinical psychopaths are likely to be criminal types where “arrogance and a criminal mindset” replace the classic Fraud Triangle requirements of pressure and rationalization before committing a crime. All the clinical psychopath needs is an opportunity.

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    Source: www.accountingweb.com

    Psychologist Jean Twenge has also written, in the books Generation Me and The Narcissism Epidemic, that narcissism, another member of the “dark triad” with a connection to accounting fraud, is increasing at an alarming rate among millennials. Those results have been disputed but the idea that millennials are narcissistic “special snowflakes” has stuck. Unlike psychopaths, narcissists have an intact conscience. However making ethical decisions requires an ability to consider the impact of your decisions on others and to the needs of others ahead of self-interest, something narcissists struggle with.

    It’s what some of the participants said that Bailey thinks educators and regulators, as well as the public accounting firms, should focus on. “Research participants are willing to give frank responses to sensitive or incriminating questions when they are confident of anonymity,” he said.

    A male junior, age 19, with the highest score by far of all participants, one point below the maximum psychopathy score, said he agrees strongly that …

    • Success is based on survival of the fittest; I am not concerned about the losers.
    • For me, what’s right is whatever I can get away with.
    • In today’s world, I feel justified in doing anything I can get away with to succeed.
    • My main purpose in life is getting as many goodies as I can.

    Acts he considers completely acceptable include…
    • Keeping $500 erroneously included in my paycheck.

    Acts he considers moderately acceptable include…
    • Claiming duplicate travel reimbursement.
    • Selling the company’s client list to a competitor.

    Psychopathy is not just a male thing, Bailey’s paper also documents answers from young women that should make audit team members look over their shoulders. One female junior, age 26, said she disagrees strongly with the statements …

    • I would be upset if my success came at someone else’s expense.
    • Cheating is not justified because it is unfair to others.

    She agrees somewhat that …
    • For me, what’s right is whatever I can get away with.
    • Making a lot of money is my most important goal.
    • I let others worry about higher values; my main concern is with the bottom line.
    • People who are stupid enough to get ripped off usually deserve it.
    • I enjoy manipulating other people’s feelings.

     

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