The Effect of Experience on the Auditor's Organization and Amount of Knowledge

Richard M. Tubbs

Research (see Wright 1988 and Bedard 1989 for reviews) has examined how experience affects the auditor's ability to perform audit tasks successfully. A plausible explanation (see, e.g., Schmidt et al. 1986) for the failure to obtain a significant positive relationship between experience and performance with regularity is that these constructs are indirectly related (for other reasons see Bonner 1990). Few studies have attempted to explicate this indirect relationship by examining the knowledge and skills that develop with audit experience and may lead to improved task performance (cf. Alba and Hutchinson 1987). The current study focuses on the manner in which experience affects knowledge structure for several reasons. First, identification of "systematic differences in content and structure of (domain-specific) knowledge... can be used to facilitate investigating the relationship [between experience and performance]" (Davis and Solomon 1989, 160). For example, when systematic differences are identified, the relationship between these differences and expert performance can be examined empirically. Second, a more refined knowledge structure is considered by many (e.g., Chi et al. 1982) to have a significant influence on skilled performance. Substantiating this point, Schmidt et al. (1986) found that job knowledge was the strongest determinant of job performance (and that experience was the strongest determinant of job knowledge). In accounting, many researchers (e.g., Frederick and Libby 1986; Biggs et al. 1988) have attributed differences in behavior to differences in knowledge, but only Bonner and Lewis (1990) and Bonner et al. (1992) have reported results consistent with this relationship. This article investigates the nature of changes in the auditor's knowledge about errors and irregularities as experience is acquired. Knowledge of errors is examined for three reasons. First, identification of errors is important to auditors; Statement on Auditing Standards (SAS) No. 53 (AICPA 1988a) specifically makes the auditor responsible for detecting errors. Second, understanding the characteristics of errors and their interaction is important when designing and performing appropriate audit procedures and evaluating the results of those procedures (AICPA 1988a, 3). Since such an understanding appears to be complex, the auditor's knowledge of errors is likely to be a meaningful area for studying the effects of experience. Third, sparse research (Libby 1985; Libby and Frederick 1990) has examined the structure of auditors' knowledge of errors. Identifying differences in knowledge between inexperienced and experienced auditors is of potential practical benefit for the training of auditors (cf. Brown and Stanners 1983). Furthermore, identification of knowledge differences can assist in more effective assignment of auditors to tasks for which they have the appropriate level of knowledge. Finally, the development of decision aids and expert systems in auditing (see Brown and Murphy 1990; Messier and Hansen 1987) can be improved. Earlier research suggests that, as auditors gain experience: (1) they know more errors, (2) they have more accurate error knowledge, (3) they know more atypical errors, and (4) the causally-related features of errors (where the errors occurred and the internal control objectives violated) become relatively more salient. Ninety-five subjects at four levels of experience performed two tasks. In task 1, subjects were given 15 minutes to list as many errors as possible that would occur in the sales-receivables-cash receipts cycle of a typical wholesaling or manufacturing company. This task was expected to facilitate examination of the relationship between experience and the quantity, quality, and typicality of knowledge of errors in an unobtrusive manner. Task 2, a conditional prediction task, was employed to produce evidence on the extent to which certain causally-related features of errors become relatively more salient with experience. Consistent with previous audit research, subjects with greater auditing experience recalled more errors and fewer incorrect items. In addition, subjects with greater auditing experience recalled more atypical errors. Two features of errors that are related to causal explanation, the violated internal control objective and the department in which the error occurred, were found to be salient. However, only the violated internal control objective appeared to increase in salience with experience.

The Effect of Experience on the Auditor's Organization and Amount of Knowledge

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