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SUMMARY: The purpose of this study is to investigate the relative influence of industryand task-based experience on auditor performance. Prior research has shown that both forms of experience can be beneficial, but studies thus far have not clarified their relative importance. Non-specialist auditor participants are used as they gain task experience across a range of industries, making it possible to disentangle the impact of each on performance. The literature indicates that the knowledge gained from industry-based experience can be applied to unfamiliar tasks set within a familiar industry context. Results from a behavioral experiment indicate that, as expected, industry-based experience has a more significant impact on auditor performance than task-based experience. Performance gains through industry experience are found to occur quickly and then level out. Reported results have implications for audit staff allocations to optimize auditor performance.
Keywords: audit quality; industry-based experience; task-based experience.
JEL Classifications: M42.
Data Availability: Data and the tasks used in this study are available on request.
INTRODUCTION
Prior research has shown that auditor performance can be enhanced by both industry- and task-based experience. As much of this research has focused on industry-specialist auditors, who gain task experience predominantly in one industry setting, the relative contribution of each is unclear. The purpose of this paper is to investigate the comparative influence of industryand task-based experience on auditor performance, using non-specialist auditor participants, who gain task experience in a variety of industry settings.
Experience is fundamental to the attainment of the knowledge that enhances auditor performance (see, for example, Ashton and Brown 1980). Research undertaken during the late 1980s found that industry-based experience enhanced auditor performance (Bonner and Lewis 1990; Bedard and Biggs 1991a). At the time, Big 8 firms were just beginning to harness the benefits of industry-based experience by organizing their auditors into industry-specialist teams (Emerson 1993).
More recently a substantial body of research has found that industry-specialist auditors demonstrate superior performance compared to non-specialist auditors (Solomon et al. 1999; Owhoso et al. 2002; Low 2004; Hammersley 2006). Task-based experience has also been found to enhance auditor performance (Libby and Tan 1994; Tan and Kao 1999; Thibodeau 2003). Unfortunately, the prior studies that have considered both industry- and task-based experience do not allow for conclusions about the relative importance...