The role of tacit knowledge in auditor expertise and human capital development

Jasmijn C. Bol*, Cassandra Estep, Frank Moers, Mark E. Peecher

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

Two critical aspects of the model of auditor expertise development in Tan and Libby [1997] are that audit firms do not value tacit knowledge in inexperienced auditors but do value it in experienced auditors. We update the former and extend the latter. Our paper predicts and finds that audit firms now do value tacit knowledge in inexperienced auditors, especially when their supervisors have higher tacit knowledge. Our proxies of value include higher promotability assessments, annual evaluations, and cash bonuses. Our paper also extends Tan and Libby [1997] by positing that enhanced development of expertise and audit firm human capital are two reasons audit firms value tacit knowledge in experienced auditors. As predicted, higher tacit knowledge in experienced auditors is positively associated with higher tacit knowledge acquisition by their inexperienced subordinates and with stronger firm commitment of inexperienced subordinates having higher tacit knowledge.

Original languageEnglish
Pages (from-to)1205-1252
Number of pages48
JournalJournal of Accounting Research
Volume56
Issue number4
DOIs
Publication statusPublished - Sep 2018

JEL classifications

  • m40 - Accounting and Auditing: General
  • m41 - Accounting
  • m42 - Auditing
  • m51 - "Personnel Economics: Firm Employment Decisions; Promotions"
  • m52 - Personnel Economics: Compensation and Compensation Methods and Their Effects

Keywords

  • tacit knowledge
  • audit expertise
  • performance evaluation
  • firm commitment
  • INFORMATION-ACCURACY
  • PUBLIC ACCOUNTING FIRMS
  • JOB-SATISFACTION
  • PERCEIVED ORGANIZATIONAL SUPPORT
  • PERFORMANCE EVALUATION
  • EMPLOYEE TURNOVER
  • SOCIAL-SKILLS
  • BALANCED SCORECARD
  • PRACTICAL INTELLIGENCE
  • LEADER-MEMBER EXCHANGE

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