Industry Experience Effects and the Auditor's Judgment Performance in the Identification of Client's Business Risks and Entity-Level Controls

41 Pages Posted: 19 Sep 2016

See all articles by Niels van Nieuw Amerongen

Niels van Nieuw Amerongen

Nyenrode Business University

Warren Robert Knechel

University of Auckland Business School

Date Written: February 01, 2010

Abstract

We examine the effect of general, task and industry experience on auditor performance related to the identification of client’s business risks (CBR) and identification of entity level controls (ELC) in a construction company. We find the following: (1) increased general experience is only helpful in the ELC task (not the CBR task) and only at a relatively high level of experience; (2) task-experience does not have an effect on either the CBR or ELC task; and (3) industry experience is particularly relevant for the CBR task (not the ELC task) at a moderate level of experience. In general, we observe that performance on tasks where declarative knowledge is relatively more important (CBR) is improved by industry experience, while performance on tasks where procedural knowledge is relatively more important (ELC) is improved by a high level of general experience.

Keywords: audit methodology, client’s business risk, audit risk, judgment performance

JEL Classification: M42

Suggested Citation

van Nieuw Amerongen, Niels and Knechel, Warren Robert, Industry Experience Effects and the Auditor's Judgment Performance in the Identification of Client's Business Risks and Entity-Level Controls (February 01, 2010). Available at SSRN: https://ssrn.com/abstract=2839865 or http://dx.doi.org/10.2139/ssrn.2839865

Niels Van Nieuw Amerongen (Contact Author)

Nyenrode Business University ( email )

Straatweg 25
P.O. Box 130
Breukelen, 3620 AC
Netherlands

Warren Robert Knechel

University of Auckland Business School ( email )

12 Grafton Rd
Private Bag 92019
Auckland, 1010
New Zealand

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