Making sense of auditor tacit knowledge

Tacit knowledge in inexperienced auditors has become valued by audit firms, particularly when they are supervised by experienced auditors who possess a high degree of tacit knowledge, according to insights from Jasmijn C. Bol (Tulane University), Cassandra Estep (Emory University), Frank Moers (Maastricht University) and Mark E. Peecher (University of Illinois). They studied accounting firms’ current practices in human capital development comparing the outcomes to previous studies, to extend upon past work by Tan and Libby [1997] and their model of “auditor expertise development”, where they previously argued that tacit knowledge was less valued by audit firms.

The research also explores how audit firms’ human capital is impacted and approaches which can be used to better leverage tacit knowledge. They discovered that auditor firms are now implementing programs that facilitate the transfer of tacit knowledge between experienced auditors (high in tacit knowledge) with less experienced auditors. Strategies include adopting mentorship programs and rewarding auditors with positive annual reviews, career advancement and financial bonuses to incentivize employee’s motivation for acquiring tacit knowledge. Thus, demonstrating audit firms are now highly committed to developing and leveraging tacit knowledge more effectively.

Full paper: Bol, J., C. Estep, F. Moers, and M. Peecher. 2018. “The Role of Tacit Knowledge in Auditor Expertise and Human Capital Development.” Journal of Accounting Research, 56 (4): 1205-1252. https://doi.org/10.1111/1475-679X.12220

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CFRA aims to provide an effective contribution to scientific research and practice-oriented, pragmatic transfer of knowledge on financial reporting and auditing, as well as financial management more generally. In our Right on the money series, we share easy-to-understand summaries of emerging research in the field. For more information visit CFRA's Website and LinkedIn.

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