[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.]

Focuses on the manner in which the experience affects the auditor's organization and amount of knowledge structure. Ability to perform audit tasks successfully; Consistency; Differences in knowledge between inexperienced and experienced auditors; Importance of errors in auditing.

Prior research on auditors' memory for evidence encountered during working paper review suggests that auditors commit memory errors that could inhibit audit efficiency and effectiveness. The current study extends this line of research by examining whether two prominent features of the auditing environment. The current study extends this line of research by examination whether two prominent features of the auditing environment, audit risk and information importance, affect the accuracy of auditors' memory and auditors' memory and author's willingness to rely on memory. These issues were examined in an experiment in which auditors were required to review two working-paper areas (accounts) and, 24 hours later, recognize if information items had been present in the working papers and express how willing they would be to rely on their memory for each item. The results indicate that (1) the accuracy of auditors' memories is positively related to the level of audit risk of the area and the degree of importance of an information item within the area; (2) the auditors' willingness to rely on memory is negatively related to the degree of information importance but not related to the level of audit risk of the area; and (3) the auditors' likelihood of referring back to the working papers is negatively related to the accuracy of auditors' memories, and this negative relationship increase with the degree of information importance. Collectively, these results suggest that audit risk and information importance altered auditor's cognitive activities during the review process in a manner that contributes to the effectiveness (e.g., better memory for more consequential evidence) and efficiency (e.g., less verification more strongly remembered and less consequential evidence) of the audit.

[Prior research on auditors' memory for evidence encountered during working paper review suggests that auditors commit memory errors that could inhibit audit efficiency and effectiveness. The current study extends this line of research by examining whether two prominent features of the auditing environment, audit risk and information importance, affect the accuracy of auditors' memory and auditors' willingness to rely on memory. These issues were examined in an experiment in which auditors were required to review two working-paper areas (accounts) and, 24 hours later, recognize if information items had been present in the working papers and express how willing they would be to rely on their memory for each item. The results indicate that: (1) the accuracy of auditors' memories is positively related to the level of audit risk of the area and the degree of importance of an information item within the area; (2) the auditors' willingness to rely on memory is negatively related to the degree of information importance but not related to the level of audit risk of the area; and (3) the auditors' likelihood of referring back to the working papers is negatively related to the accuracy of auditors' memories, and this negative relationship increases with the degree of information importance. Collectively, these results suggest that audit risk and information importance altered auditors' cognitive activities during the review process in a manner that contributes to the effectiveness (e.g., better memory for more consequential evidence) and efficiency (e.g., less verification of more strongly remembered and less consequential evidence) of the audit.]

The trend towards more structure In some of the largest accounting firms' audit methodologies has generated considerable Interest, but little empirical evidence. This study provides evidence on the role conflict and role ambiguity perceived by audit seniors in structured versus unstructured accounting firms. Role theory provides a basis for analyzing the effects of audit structure on the organizational characteristics which are potential sources of role conflict and ambiguity, The results are based on a sample of 67 seniors from structured and 54 seniors from unstructured firms. The seniors' perceptions of their firms' organizational characteristics and their perceived role stress differed systematically across structured versus unstructured firms. No evidence is found of the concerns (such as inflexibility in atypical audit environments) that have been raised regarding the trend towards Increasing audit structure.

[The trend towards more structure in some of the largest accounting firms' audit methodologies has generated considerable interest, but little empirical evidence. This study provides evidence on the role conflict and role ambiguity perceived by audit seniors in structured versus unstructured accounting firms. Role theory provides a basis for analyzing the effects of audit structure on the organizational characteristics which are potential sources of role conflict and ambiguity. The results are based on a sample of 67 seniors from structured and 54 seniors from unstructured firms. The seniors' perceptions of their firms' organizational characteristics and their perceived role stress differed systematically across structured versus unstructured firms. No evidence is found of the concenrs (such as inflexibility in atypical audit environments) that have been raised regarding the trend towards increasing audit structure.]

[Auditing has been characterized as a sequential process of obtaining and evaluating evidence (Gibbins 1984). During this process, auditors continually update their beliefs about the audit assertion being examined. Recently, Hogarth and Einhorn (1989) have posited a belief-adjustment model for updating beliefs. Based on a sequential anchoring and adjustment strategy, the model has important implications for auditors concerning the effects of the order in which evidence is evaluated. The model predicts that the order in which evidence is received has no effect on the belief-revision process when the evidence is consistent (either all positive or all negative). However, when the evidence is mixed (positive and negative), the model predicts that a recency effect will occur. Ashton and Ashton (1988) tested an earlier version of this model with experienced auditors in "simplified, well-defined settings" and found results consistent with the model's predictions. They suggested that their findings should be tested in more realistic audit contexts. Hogarth and Einhorn (1989) have suggested that findings of recency or primacy may be influenced by task complexity. Therefore, the current study tests the predictions of the model using content-rich audit scenarios. Four experiments were conducted involving 251 experienced auditors. The first experiment tested for a lack of order effect using consistent positive evidence, and the second experiment tested for a lack of order effect using consistent negative evidence. The third and fourth experiments tested for recency effects using mixed evidence with either two or four pieces of evidence. The results of the first two experiments indicated that order of evidence was not significant. Order of evidence was significant in experiment 3 in the step-by-step response condition but not in the end-of-sequence response condition. In experiment 4, order of evidence was significant in both response conditions. Therefore, the results of this empirical work support the predictions of the model, thus reinforcing the findings of Ashton and Ashton (1988).]

Tests the predictions of a descriptive model of sequential belief revision using content-rich audit scenarios. Characteristics of auditing as a sequential process; Prediction of the model in which an auditor obtains and evaluates evidence; Testing of lack of order effect.

Prior research shows that an audit supervisor’s active intervention in a subordinate’s judgment distorts that judgment. However, subordinates’ judgments are only one input into audit team judgments. How do supervisors finalize audit team judgments after actively intervening in their subordinates’ judgments? In an experiment using audit teams, supervisors with weaker or stronger goals to reach a client-preferred conclusion either were or were not asked to first actively coach a subordinate’s judgment (i.e., active intervention) before reviewing it and finalizing the audit team’s judgment. Supervisors’ intervention influenced subordinates’ inputs, which, in turn, supervisors incorporated into their final judgments. More interestingly, intervention biased supervisors’ final judgments, controlling for supervisor directional goal strength and for concurrent effects on subordinates’ inputs. However, supervisors distorted their judgments less as they perceived a larger technical knowledge advantage over subordinates. In a second experiment, auditors appear aware of the bias-reducing knowledge advantage effects but unaware of the bias-increasing active intervention effects. We discuss implications for audit team judgments and audit quality control.