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    Industry- versus Task-Based Experience and Auditor...
    research summary posted September 26, 2013 by Jennifer M Mueller-Phillips, last edited September 26, 2013, tagged 05.0 Audit Team Composition, 05.02 Industry Expertise – Firm and Individual, 11.0 Audit Quality and Quality Control, 11.04 Industry Experience 
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    Title:
    Industry- versus Task-Based Experience and Auditor Performance
    Practical Implications:

    The results of this study are important for audit firms to consider when staffing their engagements, particularly for mid-tier accounting firms.  The authors note that firms may want to consider allocating non-specialist staff among a few different industries. According to their research, there appears to be benefits due to the industry experience regardless of whether they have task-related experience.  This allows for non-specialist auditors to continue gaining task-based experiences while expanding their industry-based experiences. 

    For more information on this study, please contact Robyn Moroney.
     

    Citation:

    Moroney, R., and P. Carey. 2011. Industry- versus Task-Based Experience and Auditor Performance. Auditing: A Journal of Practice & Theory 30 (2):1-18.

    Keywords:
    Audit quality; industry-based experience; task-based experience
    Purpose of the Study:

    Prior research has shown that both industry-related experience and task-related experience improve auditor performance.  This is important because, other than training, experience is the main opportunity for an auditor to gain knowledge and improve their audit performance.  In these earlier studies, researchers focused on either task-based experience or industry-based experience.  This allows researchers to find that task-based experiences improve performance or industry-based experience improves performance but not which one is more important.  Since auditors gain industry experience by working on audit tasks for clients within an industry and vice versa, the relative importance of each has not been evaluated.  The purpose of this study is to make comparisons about whether industry-based or task-based experience is more important in the performance of non-specialist auditors.  It also seeks to determine whether continued experiences within one industry continues to increase auditor performance or if it levels out.

    Design/Method/ Approach:

    The authors collected evidence from their experiment prior to January 2009.  The authors use a sample of non-specialist auditors (including senior associates, managers, and partners) from 8 non-Big 4 accounting firms.  Participants completed two cases, one with a research and development expenditure in the manufacturing industry and another case involving investments in the superannuation (pension fund) industry.  Answers from 5 questions about each case resulted in a performance rating based on comparison of the participant’s answers to the “correct” answer as provided by an expert panel.

    Findings:
    • The authors find that industry-based experience is relatively more important than task-based experience in non-specialist auditors.
    • The authors find performance due to industry-based experience increases quickly.  As auditors spend higher percentages of their annual time in a particular industry their performance scores increase noticeably between the 0% category and the 1-10% category and again between the 1-10% category and 11-20% category. 
    • The authors also find that the impact of industry-based experience levels out once auditors spend approximately 20% of their annual time in that industry. 
       
    Category:
    Audit Quality & Quality Control, Audit Team Composition
    Sub-category:
    Industry Expertise – Firm and Individual, Industry Experience