Experience and the Ability to Explain Audit Findings

Abstract

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org. This content downloaded from 132.174.254.159 on Wed, Auditing studies to date of rank-related differences in intellectual ability (Marchant [1989]) and consensus on abilities necessary for promotion (Jiambalvo, Watson, and Baumler [1983]) have produced negative results. The homogeneity of the entry-level pool limits the potential effects of these variables. 2 Knowledge differences may relate to technical aspects of accounting systems and audit techniques; the organizational structure, operating characteristics, and external factors affecting firms in a particular industry; the policies which reflect the audit firm's utility function; and other areas. 348 Copyright (C, Institute of Professional Accounting 1990 This content downloaded from 132.174.254.159 on Wed, 27 May 2015 10:32:42 UTC All use subject to JSTOR Terms and Conditions ABILITY TO EXPLAIN AUDIT FINDINGS which allow more experienced auditors to perform tasks better (see Wright [1988] and Bedard [1989] for a review).Cognitive psychology and artificial intelligence research examining the determinants of skilled decision-making performance has shifted much of its focus from general cognitive abilities to the characteristics and impact of domain-specific knowledge acquired over years of training and experience (Glaser and Chi [1988]). Two related changes have taken place in recent studies of audit experience effects. The first involves using the assignment of tasks to more and less experienced auditors in order to identify tasks which require more or less knowledge and, therefore, should exhibit smaller or larger experience-related performance differences (see Abdolmohammadi and Wright [1987] and Bonner [forthcoming]). The second change goes further in attempting to understand the causes of differential performance by explicitly specifying the nature of the experience-related knowledge differences and the mechanisms through which they affect judgment (Frederick and Libby [1986]). The latter requires assessments of how the knowledge bases of more and less experienced auditors differ and how they influence judgment performance. While the performance of many actual procedures in an audit program is left to less experienced auditors, explaining and interpreting the implications of the results of those procedures for further testing and possible audit adjustment is usually left to more seasoned auditors. This less structured portion of audit decision making has been described by Mautz and Sharaf [1961], Einhorn [1976], Libby [1985], and Butt [1988] as a diagnostic process. Einhorn [1976] and Elstein, Shulman, andSprafka [1978] propose that the principal organizing element of diagnostic decision making is the diagnostic hypothes...

The Relationship between Audit Experience and Internal Audit Effectiveness in the Public Sector Organizations

“…Thus, this show that experienced auditors have the ability to generate more financial statement errors from transaction cycle which inexperienced auditors could not (Libby & Frederick, 1990). But this is been argued by Carpenter et al, (2002) that accounting profession has been under assault for several years because of the inability of auditors to detect frauds before the issuance of a company's financial statements, because to some extent they ignore the requirement of standard and unfortunately allow their clients' to dictate their reporting choices (Asare, et al, 2009).…”

“…In this vein, Libby and Frederick (1990) suggest that this knowledge advantage was as a result of the ability to generate more likely explanations for audit findings. This led the earlier researchers suggest that when an auditors gain experience, it's an indication that; they know more about errors; they have more accurate knowledge on error; they know more occasional errors, and the causes features of errors (Cohen & Kida, 1989;Gaballa & Ning, 2011;Libby & Frederick, 1990;Intakhan & Ussahawanitchakit, 2010;Tubbs, 1993).…”

“…In this vein, Libby and Frederick (1990) suggest that this knowledge advantage was as a result of the ability to generate more likely explanations for audit findings. This led the earlier researchers suggest that when an auditors gain experience, it's an indication that; they know more about errors; they have more accurate knowledge on error; they know more occasional errors, and the causes features of errors (Cohen & Kida, 1989;Gaballa & Ning, 2011;Libby & Frederick, 1990;Intakhan & Ussahawanitchakit, 2010;Tubbs, 1993). But Bonner and Lewis (1990) argued that even though experience is a good predictor of knowledge but not all types of knowledge are acquired equally by persons with a given amount of experience, likewise not all persons with similar experience in a domain are likely to have similar problem solving abilities but rather it depend on the task or clients activities and because the different types of knowledge are acquired through different specific experiences and training.…”

“…Donnell (2002) suggest that both experience can provide auditors with either regular knowledge or design knowledge. Even though one of the advantages of employing more experienced auditors was the complete consideration of possible explanations of events and this is because more experienced auditors' perceptions were frequently accurate (Libby, & Frederick, 1990). …”

“…Moereover, as auditors gain experience, their knowledge structures become well developed (Arel et al, 2005;Bonner, 1990;Libby & Frederick, 1990). Identification of differences in knowledge between experienced and inexperienced auditors was as a result of practical benefit for the training of the auditors, even though the identification of the knowledge can also lead to more effective assignment to the auditors, in order to perform tasks which they have the right level of knowledge (Libby & Frederick, 1990;Tubbs, 1993).…”