Auditing: A Journal of Practice & Theory American Accounting Association

Vol. 30, No. 2 DOI: 10.2308/ajpt-10060

May 2011
pp. 1–18

Industry- versus Task-Based Experience and

Auditor Performance
Robyn Moroney and Peter Carey
SUMMARY: The purpose of this study is to investigate the relative influence of industry-
and task-based experience on auditor performance. Prior research has shown that both
forms of experience can be beneficial, but studies thus far have not clarified their relative
importance. Non-specialist auditor participants are used as they gain task experience
across a range of industries, making it possible to disentangle the impact of each on
performance. The literature indicates that the knowledge gained from industry-based
experience can be applied to unfamiliar tasks set within a familiar industry context.
Results from a behavioral experiment indicate that, as expected, industry-based
experience has a more significant impact on auditor performance than task-based
experience. Performance gains through industry experience are found to occur quickly
and then level out. Reported results have implications for audit staff allocations to
optimize auditor performance.

Keywords: audit quality; industry-based experience; task-based experience.

JEL Classifications: M42.
Data Availability: Data and the tasks used in this study are available on request.

INTRODUCTION

P
rior research has shown that auditor performance can be enhanced by both industry- and
task-based experience. As much of this research has focused on industry-specialist auditors,
who gain task experience predominantly in one industry setting, the relative contribution of
each is unclear. The purpose of this paper is to investigate the comparative influence of industry-
and task-based experience on auditor performance, using non-specialist auditor participants, who
gain task experience in a variety of industry settings.

Robyn Moroney and Peter Carey are Associate Professors, both at Monash University.

The authors gratefully acknowledge the helpful comments of Michael Bamber, the two anonymous reviewers, Steven
Kachelmeier, Steven Salterio, participants at the 2008 AAA Auditing Midyear Conference, the 2007 Accounting and
Finance Association of Australia and New Zealand Conference, the 2007 ANCAAR Forum at the Australian National
University, the 2006 University of Auckland auditing symposium, seminar participants at Monash University, and the
generous support of the audit firms that participated in this study. In particular, we thank the expert panel that helped
write the tasks and model solutions and the participants for their time.
Editor’s note: Accepted by Michael Bamber.
Submitted: January 2009
Accepted: March 2010
Published Online: May 2011

1
2 Moroney and Carey

Experience is fundamental to the attainment of the knowledge that enhances auditor

performance (see, for example, Ashton and Brown 1980). Research undertaken during the late
1980s found that industry-based experience enhanced auditor performance (Bonner and Lewis
1990; Bedard and Biggs 1991a). At the time, Big 8 firms were just beginning to harness the benefits
of industry-based experience by organizing their auditors into industry-specialist teams (Emerson
1993).
More recently a substantial body of research has found that industry-specialist auditors
demonstrate superior performance compared to non-specialist auditors (Solomon et al. 1999;
Owhoso et al. 2002; Low 2004; Hammersley 2006). Task-based experience has also been found to
enhance auditor performance (Libby and Tan 1994; Tan and Kao 1999; Thibodeau 2003).
Unfortunately, the prior studies that have considered both industry- and task-based experience do
not allow for conclusions about the relative importance of industry- and task-based experience
because the industry specialists who were used gained task-based experience mainly in one industry
(see, for example, Thibodeau 2003; Moroney 2007).
Non-specialist auditors work on a range of tasks in a variety of industry settings, giving them
the opportunity to accumulate both industry and task knowledge from that experience. While the
knowledge gained from industry- and task-based experience has been found to enhance auditor
performance, no previous research has specifically investigated their relative benefits using
non-specialist auditors. Prior research has found that industry specialists can benefit from their
specialization in the absence of task-based experience. Moroney (2007) found that industry
specialists without task-based experience can outperform other auditors who have neither industry-
nor task-based experience in the task. This finding suggests that industry knowledge provides a
context within which auditors can perform relatively well on tasks unfamiliar to them (Biggs et al.
1993). We expect that industry-based experience will have a greater impact on the performance of
non-specialist auditors than task-based experience.
An unresolved question is whether ongoing exposure to clients within a single industry setting
continues to improve auditor performance. Expertise, including industry specialization, has been
characterized as a relative rather than an absolute notion (Bédard and Chi 1993). Domain-specific
experience is a precursor to the attainment of expertise (Bonner and Lewis 1990; Libby and Luft
1993; Libby 1995). This research suggests that auditors gain more relevant experience as they
move along the continuum from novice to expert. We expect that continued experience in auditing
clients within one industry setting will improve non-specialist auditor performance.
An experiment was conducted in which non-specialist auditors completed two cases: a research
and development case set in the manufacturing industry and an investment case set in the
superannuation (pension fund) industry. The cases in this study allow us to investigate the relative
influence of industry- and task-based experience on auditor performance in two ways. First, both
cases involve tasks common to companies in a variety of industries. Participants could have
task-based experience, with or without matched industry-based experience, in both cases used. The
cases draw upon task knowledge gained from experience in auditing accounts within or outside the
industry setting used. Second, both cases are set in industry settings where a range of tasks are
performed. Participants could have industry-based experience, with or without matched task-based
experience, in both cases used. The cases used in this study allow auditors with relevant
industry-based experience to utilize the contextual knowledge gained from that experience (Biggs
et al. 1993) to perform well on a task with which they may or may not be familiar.
We find that industry-based experience has a greater impact on auditor performance than
task-based experience, supporting our expectations. Sustained exposure to clients within a single
industry setting initially improves auditor performance and then levels out. This result suggests that
there may be merit in non-specialist auditors having a number of clients across a few industry
settings.

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Industry- versus Task-Based Experience and Auditor Performance 3

The following section of this paper outlines the background to our research and hypothesis
development. In subsequent sections the experiment is explained, followed by the results and
conclusions.

BACKGROUND AND HYPOTHESIS DEVELOPMENT

According to behavioral decision theory, task performance is determined by an individual’s
experience, ability, and knowledge (Bonner and Lewis 1990; Libby and Luft 1993; Libby 1995).
Experience and innate ability impact knowledge acquisition and task performance. Knowledge is
not observable (Libby and Luft 1993) but it can be measured indirectly by constructing an
experimental task where knowledge differentiation is predicted based on differences between
individuals and measured via performance variation (Bedard and Biggs 1991a; Libby and Luft
1993).
Early research found that audit experience improves performance (see, for example, Ashton
and Brown 1980). Subsequent work has shown that more experienced auditors do not always
outperform less experienced auditors (Libby and Luft 1993). Rather than focusing on the amount of
generic audit experience, researchers identified the importance of knowledge gained from
experiences within specific contexts in enhancing auditor performance (Libby and Luft 1993; Libby
1995). Knowledge can be gained from training or on-the-job experience. A distinction is therefore
made between general domain knowledge, gained by all auditors, and sub-specialty knowledge,
gained only through practice and feedback in a particular domain (see, for example, Bédard 1989;
Davis and Solomon 1989; Ashton 1991).
Researchers found that industry-based experience was associated with superior auditor
performance (e.g., Bédard 1989; Bedard and Biggs 1991a; Wright and Wright 1997). Experience
and training within an industry context provides an opportunity to accumulate this form of
sub-specialty knowledge (Bonner 1990; Bonner and Lewis 1990; Bédard and Chi 1993; Taylor
2000). Since the late 1980s, the largest accounting firms have harnessed the benefits of
industry-based experience by organizing their auditors into industry-specialist teams. Industry
specialists spend most of their time auditing clients in a single industry setting and gain their
experience either on the job or via staff training (Solomon et al. 1999, 191192).
A substantial body of research has found that industry specialization impacts auditor judgment
on a range of tasks. Industry specialists demonstrate less conservative assessment of inherent risk
levels (Taylor 2000), more accurate non-error frequency knowledge (Solomon et al. 1999), more
effective detection of seeded errors during the review process (Owhoso et al. 2002), more accurate
assessment of audit risk (Low 2004), and a greater ability to interpret and complete partial cue
patterns (Hammersley 2006). In these papers it was industry knowledge that was used to predict
superior performance across a range of tasks. In each case an auditor’s industry knowledge was
expected to provide the context for superior auditor performance.
Big 4 firms use industry specialization as a quality signal (Ferguson et al. 2003) and it is
frequently used as a proxy for audit quality in empirical research (Craswell et al. 1995; Kwon 1996;
Hogan and Jeter 1999; Krishnan 2003; Carcello and Nagy 2004; Francis 2004; Lim and Tan 2008).
Archival research confirms the benefits of industry specialization across a variety of audit-quality
measures (i.e., higher earnings response coefficients, lower discretionary accruals, less fraudulent
reporting, and higher audit fees; see a summary of this literature in Francis [2004]).
Task expertise is gained through training and experience gained during an audit. Early
theoretical literature proposed the unique effect of task-specific experience on auditor performance
(Marchant 1990; Libby 1995), and behavioral research has confirmed this hypothesized link
(Bonner and Lewis 1990; Choo and Trotman 1991; Ashton 1991; Bédard and Chi 1993; Tan and
Libby 1997; Wright 2001; Thibodeau 2003).

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4 Moroney and Carey

Behavioral research has found that task-based experience can improve the quality of auditor
judgment by providing the opportunity to gain declarative knowledge (Bonner 1990; Choo and
Trotman 1991; Bédard and Chi 1993), error frequency knowledge (Ashton 1991), and
meta-knowledge (Bédard and Chi 1993). Wright (2001) found that task-based experience and
feedback improved loan collectability performance. Thibodeau (2003) found that industry-specialist
experience on certain tasks can be transferred from one industry setting to another, suggesting that
task experience is not necessarily industry-bound. Industry-specialist auditors currently have
limited scope to apply their task knowledge across industry settings because they mainly work
within one industry setting.
While the empirical literature has identified a benefit from both industry- and task-based
experience, prior research is inconclusive as to the relative benefit of each. Research by Thibodeau
(2003) found that task experience gained within a specialist industry setting enhances the
performance of specialists undertaking that task when working outside their industry. By contrast,
Moroney (2007) reports that task-based experience did not impact the performance of
industry-specialist auditors over and above the benefit of industry specialization. Research
investigating the relative influence of industry- and task-based experience using industry-specialist
auditors lacks external validity because task-based experience is predominantly gained within a
single industry setting.
Auditors who are neither industry nor task specialists do not have the sub-specialty knowledge
of experts. Yet all auditors gain industry-based experience when auditing clients within an industry
setting and task-based experience via exposure to tasks performed for a variety of clients across a
range of industry settings. While it is not clear whether non-specialists benefit most from their
industry- or task-based experience, the findings of Bonner and Lewis (1990) and Biggs et al. (1993)
suggest that industry-based experience is the more important of the two.
Bonner and Lewis (1990) note that industry-based experience creates sub-specialty knowledge
about an industry. That knowledge is argued to enable auditors to perform well across a variety of
tasks (an internal control task, a ratio analysis task, and an interest rate swap task). Industry
knowledge provides an understanding of relevant auditing and financial reporting issues, laws, and
regulations and the business environment that companies operate within. It provides the framework
within which various tasks are completed.
Task-based experience provides an opportunity to gain knowledge of a particular task. While
that knowledge can be transferred from one client to another, without relevant industry knowledge,
the benefit of task-based experience is limited. When performing a familiar task in an unfamiliar
industry setting, auditors will not have knowledge of the business environment, regulations, and
other factors that may impact their performance on that task (Bonner and Lewis 1990).
Biggs et al. (1993) found that for a going-concern task, client-based knowledge was critical.
Client-based knowledge is gained via experience working on a client, researching the client, the
industry it operates in, and how economic events impact that client. When making a going-concern
judgment, an auditor must gain a detailed understanding of that client and the industry in which it
operates. Details of a client’s financial difficulties and any mitigating factors are then placed within
the context of that knowledge to allow an informed going-concern judgment to be made. While it is
possible to perform relatively well on an unfamiliar task, such as a going-concern task, with
knowledge of a client and the industry in which it operates, it is more difficult to perform well on a
familiar task in an unfamiliar industry.
The preceding discussion suggests that non-specialists with experience in auditing clients in the
same industry setting will have a context that they can refer back to, to help them with a task set in
that industry. We accordingly develop the following hypothesis for auditors who are neither
industry nor task specialists, referred to here as non-specialist auditors:

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Industry- versus Task-Based Experience and Auditor Performance 5

H1: For non-specialist auditors, industry-based experience has a greater impact on auditor
performance than task-based experience.
An unresolved research question is whether exposure to clients within a single industry setting
continues to enhance auditor performance beyond some minimum. Early research found that
auditors with industry experience demonstrated superior judgment and performance when
compared to auditors with little or no industry experience (see, for example, Bedard and Biggs
1991a; Wright and Wright 1997). Bedard and Biggs (1991a) found that auditors with extensive
industry-based experience performed best on a hypothesis-generation task. Wright and Wright
(1997) found mixed results for experience in auditing retail clients and performance on various
hypothesis-generation tasks.
More recently, research investigating the judgment and performance of industry-specialist
auditors has consistently found that industry specialists demonstrate superior performance when
compared to non-specialists (e.g., Solomon et al. 1999; Owhoso et al. 2002; Thibodeau 2003; Low
2004; Hammersley 2006; Moroney 2007). Both early and recent research found strongest results
when comparing the performance of those with extensive industry-based experience to those with
little or no industry-based experience. This research ignores the potential for performance gains for
non-specialists with some industry-based experience.
Prior research has noted that expertise (including industry specialization) can be
conceptualized as a relative rather than an absolute notion (Bédard and Chi 1993). One antecedent
of expertise is relevant experience (Libby and Luft 1993; Libby 1995). As auditors shift along the
continuum that ranges from novice to expert, the attainment of more relevant experience aids in the
attainment of knowledge, which in turn improves auditor performance. Industry-based experience
provides an opportunity to gain industry knowledge, which in turn provides a context for enhanced
auditor performance. We therefore expect that, for non-specialist auditors, there is a positive
relation between the extent of industry-based experience and auditor performance.
H2: For non-specialist auditors, auditor performance is positively related to the extent of
industry-based experience.

RESEARCH DESIGN
The Experiment
An experiment was conducted in the offices of eight non-Big 4 accounting firms.1 The cases
used in the experiment involved tasks common, but not necessarily unique, to audit clients in each
industry setting (manufacturing and superannuation). The cases were developed with the aid of an
expert panel comprised of audit partners from Big 4 accounting firms.2 The cases and solutions
were written by partners from Big 4 firms. They were then sent around to the other expert panelist
partners and back to the initial partners until all agreed on the wording and the content. Audit
partners from each participating non-Big 4 firm confirmed that the experimental cases reflect the
types of tasks their staff encounter when auditing their firm’s clients.
The expertise paradigm was utilized in developing the cases (Einhorn 1976; Bédard 1989;
Libby and Luft 1993; Libby 1995; Solomon et al. 1999). This paradigm stresses the importance of

1
The firms were BDO, Grant Thornton, HLB Mann Judd, Horwath, Moore Stephens, Pitcher Partners, RSM Bird
Cameron, and William Buck. A Kruskal-Wallis test was run to compare performance across the eight participating
audit firms. The result is not significant (v2 ¼ 9.827, d.f. ¼ 7, p . 0.1, not tabulated), indicating that there are no
meaningful differences between firms.
2
The same cases were used to measure industry-specialist auditor efficiency and effectiveness at various stages of
the decision-making process (Moroney 2007).

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6 Moroney and Carey

specifying the knowledge necessary to complete a specified task and that the task must be
developed so that the implications of using (or not using) that knowledge are observable (Libby and
Luft 1993). Thus, while industry and task knowledge were not measured directly, use of this
paradigm allows the development of tasks that demonstrate whether industry or task knowledge has
been gained via relevant industry- or task-based experience.
In line with the expertise paradigm, the expert panel members confirmed that the cases are
realistic and based upon problems faced by auditors (Bedard and Biggs 1991a, 1991b; Gibbins and
Jamal 1993; Trotman 1996). They are sufficiently ill defined (Abdolmohammadi and Wright 1987;
Bedard and Biggs 1991a, 1991b; Trotman 1996) in order to assess whether each type of experience
impacts performance (Bédard and Chi 1993). Had the cases been too simple and structured, the
auditors would have been expected to perform equally well with or without relevant industry- or
task-based experience (Bedard and Biggs 1991b; Bonner 1990).
The case set in the manufacturing industry deals with research and development expenditure. It
consists of information regarding a client, together with five questions on research and development
expenditure; in particular, which procedures to use when auditing research and development
expenditure, which items from a list provided can be capitalized, and how a government grant
should be handled. Excerpts from relevant accounting standards were provided as information cues.
It is possible for auditors to gain experience in auditing research and development expenditure
for clients in a variety of industries, such as the rural, electronic, and medical, as well as,
manufacturing industries. Relevant task-based experience aids in the completion of this case as it
deals with issues that auditors generally consider when auditing research and development in any
industry, such as the issue of expensing versus capitalization of expenditure.
It is also possible for auditors to gain experience in auditing clients in the manufacturing
industry without ever auditing research and development expenditure for those clients. The
knowledge gained when auditing clients in an industry setting provides a context for any task
performed within that setting (Biggs et al. 1993). Relevant industry-based experience aids in the
completion of this case as the task is set in the manufacturing industry and deals with issues of
producing and selling a product.
The case set in the superannuation industry deals with the identification of audit procedures
necessary to confirm the existence, rights, and obligations and valuation of investments. The informa-
tion cues provided to participants included excerpts from relevant accounting standards and regula-
tions. These regulations detail the auditing and disclosure rules particular to superannuation funds.
It is possible for auditors to gain experience in auditing investments for clients in a variety of
industries, such as the insurance, property, mining, and banking, as well as, superannuation
industries. Relevant task-based experience aids in the completion of this case as it deals with issues
that auditors generally consider when auditing investments in any industry, such as the issue of
valuing investments.
It is also possible for auditors to gain experience in auditing clients in the superannuation
industry without ever auditing investments for those clients. Relevant industry-based experience
aids in the completion of this case as it is couched within a superannuation fund and deals with
investments common to such funds.
An experienced researcher was present when the experiment was conducted in each of the
offices of the participating firms. A standard introduction and consent form was provided to each
participant, outlining in broad terms the purpose of the experiment. Using a unique username and
password, participants were invited to log on to the Internet-based program designed by a specialist
programmer. After logging on, each participant read an introduction that explained the project in
broad terms and how the software was to be used. Participants then read through a practice case and
accompanying information cues to familiarize themselves with the format of the software. In the
interest of saving time, participants were asked not to complete the practice case. The participants

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Industry- versus Task-Based Experience and Auditor Performance 7

then completed the cases described above. The order of the two cases was randomized between
subjects to control for any fatigue. None was found (F ¼ 0.268, p . 0.6). Finally, participants
answered exit questions that were used to measure industry- and task-based experience as well as
years of auditing experience.
Figure 1 contains a problem-solving map (e.g., Hershey et al. 1990) that describes how
participants could move through each case. The arrows demonstrate a possible route to solving a
case. After reading the case materials, participants could either go to the information menu, where a
list of information cues was provided,3 or elect to provide an answer to the question(s) posed in the
case. They could move between the case materials, the information cues, and the solution input
screen as often as they wished before submitting their final solution for the case.

Participants
Partners from the participating firms nominated non-specialist audit staff to take part in the
experiment. All participants were non-industry specialists and non-task experts. A minimum of two
years of audit experience was set to ensure that all participants had sufficient work experience to
deal with the case materials. In total, 83 auditors with an average 7.1 years of audit experience
completed the two cases outlined above. Of the 83 auditors, 31 were seniors with an average of 3.7
years of audit experience, 44 were managers with an average of 7.7 years of audit experience, and 8
were partners with an average 16.4 years of audit experience.
In the year leading up to the experiment, 18 of the 83 participants had no industry-based
experience in either the manufacturing or the superannuation industry, 11 had experience with clients
in both industries, and 54 had experience in only one industry. In the year leading up to the
experiment, 39 of the 83 participants had no task-based experience in either research and development
or in investments, 10 had experience in both tasks, and 34 had experience in only one task.
The 83 participants completed two cases, providing 166 usable responses. Seventy-six
participants reported having industry-based experience and 54 participants reported having task-
based experience. Of the 76 reporting industry-based experience, 56 (20) were in the manufacturing
(superannuation) industry. Of the 54 reporting task-based experience, 23 (31) specified research and
development costs (investments).

Model
H1 predicted that for non-specialist auditors, industry-based experience has a greater impact on
auditor performance than task-based experience. To test this hypothesis, we estimate the following
regression of auditor performance:
PERFORMANCE ¼ a þ b1 IBE þ b2 TBE þ b3 AE þ e ð1Þ
where:
PERFORMANCE ¼ participant score on a case (from 0 to 10);
IBE ¼ binary variable where 1 equals industry-based experience;

3
Each case came with eight information cues, which included excerpts from accounting standards and industry
regulation. The cues did not add any new information to the basic case materials. A comparison was made of the
number of cues read for those with and without industry-based experience and those with and without task-based
experience. Those with industry-based experience read an average of 2.3 cues, while those without read an
average of 2.5 cues. The difference was not significant ( p . 0.6). Those with task-based experience read an
average of 2.5 cues, while those without read an average of 2.3 cues. The difference was not significant ( p . 0.6).
Thus, the information cues read when completing the cases does not appear to have influenced the results reported
in this paper.

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8 Moroney and Carey

FIGURE 1
Problem-Solving Process Map

Source: Based on Hershey et al.’s (1990, 89) diagram of The Problem-Solving Process Map.

TBE ¼ binary variable where 1 equals task-based experience; and

AE ¼ log of years of audit experience.
If b1 is greater than b2, then industry-based experience has a greater impact on performance
than task-based experience and H1 is supported.
The variable PERFORMANCE is measured as the degree of completeness of each
participant’s solution when compared to the solution provided by the expert panel. Each par-
ticipant’s solution was blind-coded by two expert coders by comparing it to the model solution.
Coders identified whether the participant’s solution contained each element of the expert panel
solution. Cohen’s Kappa (Cohen 1960) was 0.9389 for the manufacturing case and 0.9281 for the
superannuation case (both significant at p , 0.001). The greater the consistency between a
participant’s answer and the model solution, the higher the participant’s PERFORMANCE score
(to a maximum of 10).
Industry-based experience was measured by asking participants to ‘‘Please list the proportion of
your time over this last year that you spent auditing clients in different industry settings. For
example: Insurance (10%), Retail (30%), Superannuation (50%), and Financial Services (10%),’’
totaling 100% for the year (following the procedure used in Bonner and Lewis [1990] and Bedard
and Biggs [1991a]). The data for industry-based experience are highly skewed because 90 of the
166 responses reported having no industry-based experience (see discussion in next section). The
present analysis therefore uses the binary variable IBE to measure industry-based experience.
The binary variable IBE allows us to present some interesting descriptive statistics for auditors
with or without industry-based experience. In the ‘‘Results’’ section we report the outcome using the
binary measure of industry-based experience in the main analysis and the continuous measure,
extent of industry-based experience, as a footnote. This analysis allows us to conduct a more
complete analysis of the impact of industry-based experience on auditor performance.

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Industry- versus Task-Based Experience and Auditor Performance 9

To measure task-based experience participant auditors were asked ‘‘Have you had personal
experience advising clients about accounting for research and development costs (auditing
investments for a superannuation fund)? If yes, how recently?’’ This resulted in the binary variable
TBE measuring task-based experience in the year leading up to the experiment.
To control for general audit experience (see, for example, Bédard 1989; Davis and Solomon
1989; Bonner and Lewis 1990; Ashton 1991; Tan and Kao 1999), participants were asked ‘‘How
many years have you worked as an auditor?’’ A transformation is made to normalize the distribution
of the years of audit experience as initial statistical results on the unlogged variable revealed
significant skewness (z ¼ 2.075) and kurtosis (s ¼ 6.747). The logged variable addressed the issue
and normalized the distribution.
To test H2, we estimate the following regression of auditor performance:
PERFORMANCE ¼ a þ b1 EIBE þ b2 AE þ e ð2Þ
where:
PERFORMANCE ¼ participant score on a case (from 0 to 10);
EIBE ¼ log of extent of industry-based experience; and
AE ¼ log of years of audit experience.
The analysis includes those observations where the auditor has some industry experience (i.e.,
IBE ¼ 1). For auditors with some industry-based experience, the variable EIBE measures the
proportion of the year spent auditing clients in either manufacturing or superannuation. A
transformation is made to normalize the distribution of the extent of industry-based experience as
initial statistical results on the unlogged variable revealed significant skewness (z ¼ 1.975) and
kurtosis (s ¼ 4.138). The logged variable addressed the issue and normalized the distribution.

RESULTS
Descriptive Statistics
Table 1 contains the descriptive statistics for the 83 participants across the two cases, providing
166 data points. Panel A of Table 1 presents the mean performance for the 76 participants who
reported having industry-based experience (3.90) and the remaining 90 participants without
industry-based experience (2.65). The analysis of variance (ANOVA) in Panel B shows that the
difference in performance is significant (F ¼ 20.188, p , 0.001).4 This finding is consistent with
results from research in a Big 8 setting prior to industry specialization, which suggest that industry-
based experience is an important determinant of auditor performance (Bédard 1989; Bedard and
Biggs 1991a; Wright and Wright 1997).
Panel C of Table 1 presents the mean performance for the 54 participants who reported having
task-based experience (3.35) and the remaining 112 participants with no task-based experience
(3.16). The ANOVA in Panel D shows that this difference in performance is insignificant (F ¼
0.331, p . 0.5).5

4
When years of audit experience is included as a covariate, industry-based experience remains significant ( p ,
0.001) and audit experience is insignificant ( p . 0.2). When the ANOVA is run using extent of industry-based
experience, the result remains significant (F ¼ 11.466, p , 0.001).
5
When years of audit experience is included as a covariate, task-based experience remains insignificant ( p . 0.7)
and audit experience is insignificant ( p . 0.2). When task-based experience is measured without a constraint on
being within the previous year, the mean performance for those with task-based experience is 3.46, compared to
2.96 for those without ( p ¼ 0.10, two-tailed), which is a marginally significant difference.

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10 Moroney and Carey

TABLE 1
Descriptive Statistics
(n ¼ 166)
Panel A: Impact on Performance of Industry-Based Experience
Industry-Based No Industry-Based
Experience (n ¼ 76) Experience (n ¼ 90)
Mean 3.90 2.65
Standard deviation (1.92) (1.79)
Min. 0 0
Max. 8 9

Panel B: ANOVA for Performance and Industry-Based Experience

Source of Variation d.f. F p
Industry-based experience 1 20.188 0.000

Panel C: Impact on Performance of Task-Based Experience

Task-Based No Task-Based
Experience (n ¼ 54) Experience (n ¼ 112)
Mean 3.35 3.16
Standard deviation (1.90) (1.98)
Min. 0 0
Max. 9 8.5

Panel D: ANOVA for Performance and Task-Based Experience

Source of Variation d.f. F p
Task-based experience 1 0.331 0.566

Panel E: Impact on Performance of Industry- and Task-Based Experience [(Mean) Standard Deviation]
Industry-Based No Industry-Based
Experience Experience
(n ¼ 76) (n ¼ 90)
Task-based experience (n ¼ 54) 3.67 2.76 t ¼ 1.703 (0.095)
(1.75) (2.08)
n ¼ 35 n ¼ 19
No task-based experience (n ¼ 112) 4.15 2.60 t ¼ 4.280 (.000)
(2.04) (1.72)
n ¼ 41 n ¼ 71
t ¼ 1.077 (.285) t ¼ 0.354 (.724)
Variable Definitions:
Performance ¼ participant score on a case (ten-point scale);
Industry-based experience ¼ binary variable where 1 equals industry-based experience; and
Task-based experience ¼ binary variable where 1 equals task-based experience.

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Industry- versus Task-Based Experience and Auditor Performance 11

Inter-Group Comparison
Panel E of Table 1 includes a breakdown of the data presented in Panels A and C. It provides
an analysis of the four combinations of industry-based and task-based experience; auditors with
both industry- and task-based experience (top left cell) (n ¼ 35), auditors with industry but not task-
based experience (bottom left cell) (n ¼ 41), auditors with task but not industry-based experience
(top right cell) (n ¼ 19), and auditors with neither industry- nor task-based experience (bottom right
cell) (n ¼ 71).
The data in Panel E indicate that industry-based experience impacts performance when an
auditor reported having task-based experience (first row, t ¼ 1.703, p , 0.1) or not (second row, t
¼ 4.280, p , 0.001). In contrast, task-based experience does not significantly impact performance
when an auditor reported having industry-based experience (first column, t ¼ 1.077, p . 0.2) or
not (second column, t ¼ 0.354, p . 0.7). Those with industry-based experience but no task-based
experience (bottom left cell, mean ¼ 4.15) outperform those with task-based experience but no
industry-based experience (top right cell, mean ¼ 2.76) (t ¼ 2.426, p , 0.02, not tabulated).
These results suggest that non-specialist auditors demonstrate superior performance when faced
with an unfamiliar task within a familiar industry setting (context), but not when faced with a
familiar task in an unfamiliar industry setting. This finding is consistent with Moroney (2007)
who found that industry-specialist auditors without task-based experience outperformed auditors
without relevant industry- or task-based experience. This result is also consistent with Biggs et al.
(1993) who found that performance was enhanced by opportunities to gain client-based
knowledge from experience working on a client, researching the client, and the industry in which
it operates.
The data from Panel E of Table 1 are depicted diagrammatically in Figure 2. The two lines both
have a positive slope, illustrating that those with industry-based experience perform better than those
without. The lines are overlapping, suggesting that once industry-based experience is accounted for,
task-based experience does not explain any significant difference in performance. The descriptive
data presented in Table 1 and Figure 2 provides preliminary support for the first hypothesis that
industry-based experience has a greater impact on auditor performance than task-based experience.

Within-Subject Analysis
A within-subject analysis was performed using a reduced sample of the 54 participants who
reported having industry-based experience in only one industry setting. They performed
significantly better on the case in which they had industry experience (4.24) than when they did
not (2.26) (F ¼ 37.474; p , 0.001, not tabulated). A within-subject analysis was also performed
using a reduced sample of the 34 participants who reported having task-based experience with only
one task. The difference in performance when participants had task experience (3.34) compared to
when they did not (3.09) was not significant (F ¼ 0.232; p . 0.6, not tabulated).

Industry and Task-Based Experience (H1)

Regression Analysis
H1 predicted that for non-specialist auditors, industry-based experience has a greater impact on
auditor performance than task-based experience. Both types of experience are regressed against
performance to measure their relative impact on non-specialist auditor performance. Results for the
regression expressed in Equation (1) are presented in Table 2. Industry-based experience is
significantly associated with superior auditor performance (t ¼ 4.515, p , 0.001) while task-based
experience is not (t ¼0.813, p . 0.4) after controlling for years of audit experience (t ¼ 1.255, p
. 0.2). A Wald test revealed that b1 (0.345) is not equal to b2 (0.063), which rejects the
hypothesis of equality between IBE and TBE (F ¼ 9.74, p , 0.003, not tabulated). Results indicate

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12 Moroney and Carey

FIGURE 2
Industry- and Task-Based Experience

Variable Definitions:
Performance ¼ participant score on each case (ten-point scale);
Industry-based experience ¼ binary variable for which ‘‘yes’’ indicates that the participants had industry-based
experience and ‘‘no’’ indicates that the participants had none; and
Task-based experience ¼ binary variable; the line with the diamond shape at either end represents the average
performance for those with task-based experience and the line with the square at either end represents
the average performance for those without task-based experience.

that industry-based experience has a greater impact on performance than task-based experience and
H1 is supported.6
Years of audit experience is insignificant and does not significantly impact performance. The
two are uncorrelated (r ¼ 0.021; p . 0.7, not tabulated). This finding supports early research that
generic audit experience alone does not improve audit performance (for example, Libby and Luft

6
When the regression is run using extent of industry-based experience (rather than the binary variable IBE), the
result remains as reported with extent of industry-based experience significant (F ¼ 3.658, p , 0.001) and with
the beta for industry-based experience (0.286) greater than the beta for task-based experience (0.035). When
the regression is run using task-based experience at any stage (i.e., not just within the previous year as reported
in the main analysis), the results are as reported here, with the beta for industry-based experience (0.323)
exceeding the beta for task-based experience (0.021).

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Industry- versus Task-Based Experience and Auditor Performance 13

TABLE 2
Test of H1
Industry- versus Task-Based Experience and Performance
Regression with Performance as the Dependent Variable
(n ¼ 166)
Variable Beta t p
Intercept 4.494 0.000
Industry-based experience 0.345 4.515 0.000
Task-based experience –0.063 –0.813 0.417
Audit experience 0.094 1.255 0.211
F ¼ 7.373, p ¼ 0.000; Adj. R2 ¼ 0.104
Variable Definitions:
Performance ¼ participant score on a case (ten-point scale);
Industry-based experience ¼ binary variable where 1 equals industry-based experience;
Task-based experience ¼ binary variable where 1 equals task-based experience; and
Audit experience ¼ log of years of audit experience.

1993; Libby 1995). Rather it is experience in a particular domain that allows relevant knowledge to
be gained and performance to be enhanced within that industry or task domain.

Extent of Industry-Based Experience (H2)

H2 predicted that for non-specialist auditors, performance is positively related to the extent of
industry-based experience. On a reduced sample of 76 responses, after excluding the 90 instances
where auditors reported having no industry-based experience, descriptive results show that
performance and the extent of industry-based experience are positively correlated (r ¼ 0.194; p ,
0.1, not tabulated). This finding suggests that performance improves with industry-based
experience.
Results for the regression expressed in Equation (2), which is used to test H2, are presented in
Table 3. The extent of industry-based experience significantly improves auditor performance (t ¼
2.073, p , 0.05) after controlling for audit experience (t ¼ 1.363, p . 0.1), which is again
insignificant. This finding provides support for H2, that for non-specialist auditors, performance is
positively related to the extent of industry-based experience.
Figure 3 provides some insight into the association between the extent of industry-based
experience and auditor performance. The graph reports the mean performance for participants
based on the proportion of the year spent auditing clients in an industry setting.7 The line is steep
early on, indicating performance gains are made over a relatively short period of time when
auditing clients in the same industry. However, the line soon flattens. From the diagram it
appears that, on average, once auditors spend about 20 percent of their year auditing clients in a
single industry, they begin to perform as well as auditors with more extensive industry-based
experience. This observation is confirmed using a curve estimation technique to calculate the

7
Of the 166 data points (83 participants completing two cases), 90 had no industry-based experience, 24 had spent
up to 10 percent of the preceding year auditing clients in a single industry setting, 20 had spent 11–20 percent, 17
had spent 21–30 percent, 5 had spent 31– 40 percent, 3 had spent 41–50 percent, and 7 had spent more than 50
percent in a single industry setting.

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14 Moroney and Carey

TABLE 3
Test of H2
Impact on Performance of the Extent of Industry-Based Experience
Variable Beta t p
Intercept 0.875 0.374
Extent of industry-based experience 0.250 2.073 0.042
Audit experience 0.164 1.363 0.177
F ¼ 2.389, p ¼ 0.090; Adj. R2 ¼ 0.036
Variable Definitions:
Performance ¼ participant score on a case (ten-point scale);
Extent of industry-based experience ¼ log of extent of industry-based experience; and
Audit experience ¼ log of years of audit experience.

FIGURE 3
Extent of Industry-Based Experience and Performance

Variable Definition:
Performance ¼ participant score on each case (ten-point scale).

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Industry- versus Task-Based Experience and Auditor Performance 15

point beyond which a further increase in industry-based experience does not continue to improve
performance.8 The quadratic model indicates that 19 percent is the point at which the
performance benefit of continued industry-based experience levels out (p , 0.05, one-tailed).9
This finding is interesting. It suggests that the benefits of working within one industry setting
are made early and increase quickly, but then level out. The implication is that while non-specialists
do not have the sub-specialty knowledge gained by industry specialists with years of experience
working in a single industry setting, they may benefit from working on clients across limited
industry settings.

SUPPLEMENTARY ANALYSIS
Both hypotheses are retested, separating the data for the manufacturing and superannuation
industry cases. Descriptive results from an ANOVA indicate that while the coefficients for both
industry- and task-based experience suggest improved performance in the manufacturing and
superannuation cases, the results are not statistically significant. Similarly, industry-based
experience is not a significantly better predictor of improved auditor performance than task-based
experience when the data are separated for each case. This result is likely explained by the smaller
sample sizes when data are partitioned in this way. For the second hypothesis, when charts are
prepared for each industry group, the results are in the same direction, with performance gains
predominantly being made early. The results for the regression between performance and extent of
industry-based experience (when greater than zero) are not significant in the manufacturing and
superannuation industry groups. Again, this result may be driven by the reduced numbers of
participants with industry-based experience when the analysis is undertaking by industry group.

CONCLUSION
The purpose of this paper was to investigate the comparative influence of industry- and
task-based experience on auditor performance, using non-specialist auditor participants, and to
investigate whether increased exposure to clients from a single industry setting continues to
improve auditor performance. Non-specialist auditors have varying amounts of experience in
auditing clients across a range of industry settings. They also gain a variety of task-based
experiences when auditing those clients.
Results from a behavioral experiment suggest that industry-based experience has a greater
impact on auditor performance than task-based experience. Industry-based experience impacts
performance irrespective of whether an auditor has task-based experience. Non-specialist auditors
gain valuable knowledge from their industry-based experiences, which can be used to aid their
performance on tasks unfamiliar to them.
We also find that auditor performance improves with greater exposure to clients in one industry
setting. However, the relation between industry-based experience and performance appears to be
curvilinear with gains made quickly and then leveling out. This finding implies that non-Big 4 firms
would benefit from allocating staff to clients across a few industry settings as there appears to be
some benefits to continued exposure to clients in one industry. Future research might explore
quality differentials based on industry-based experience between non-Big 4 audit firms, drawing on
the methodology used to test city-level specialization (e.g., Francis et al. 1999).

8
We use this technique because the relation between performance and extent of recent industry-based experience is
not linear.
9
The quadratic model provides a constant of 2.812 and a b1 of 0.074. To calculate the point beyond which
performance is not improved with more time auditing clients in one industry setting, the constant is divided by 2 3
b1 (2.812/(2 3 0.074) ¼ 19).

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16 Moroney and Carey

Limitations
The behavioral study described in this paper has limitations. The independent variables,
industry-based experience, task-based experience, and extent of industry-based experience, were
self-reported by participants. When measuring industry-based experience, participants were asked
to list the proportion of their time over the prior year spent auditing clients in different industry
settings. While this measure aids in the identification of recent experience, it does not capture
industry-based experience in prior years, underestimating the benefits of industry-based experience.
Task-based experience was measured by asking participants whether they had experience with
each task used in the cases and if so, how recently. This measure does not take into account extent
of task-based experience. Just as participants were found to benefit from greater exposure to clients
in one industry setting, they may have benefited from greater exposure to the same task across a
number of clients. Future research could consider the benefits of greater task-based experience on
auditor performance.
When measuring task-based experience, participants were asked if they had experience in
auditing investments in a superannuation context. This question raises a concern that only
participants with both task and superannuation industry-based experience would answer in the
affirmative. However, 14 of the 31 participants indicated having experience in auditing investments
in the year leading up to the conduct of the experiment and with no superannuation industry
experience in the same timeframe. This suggests that the question was answered with reference to
the task alone by some participants, thereby reducing, but not eliminating, this concern.
Future research might develop more sophisticated measures for industry- and task-based
experience. Such measures may allow for the identification of opportunities for non-specialist
auditors to transfer knowledge gained from one industry setting to another and one task setting to
another. One improvement would be to measure and compare the relative benefits of task-based
experience gained within and outside an industry setting.
Industry- and task-based experience provides auditors with the opportunity to gain different
types of knowledge; however, experience is an indirect measure of knowledge acquisition. In this
paper we rely on self-reported measures of industry- and task-based experience to predict superior
performance, making assumptions about the attainment of industry and task knowledge via such
experience. While this approach is not new (Bonner and Lewis 1990; Bedard and Biggs 1991a),
future research could measure the impact of experience on the attainment of domain specific
(industry or task) knowledge and the consequent impact on the performance of non-specialist
auditors.
Our findings indicate that non-specialist auditors benefit from industry-based experience. An
implication of this finding is that there are benefits to auditing clients in limited industry settings, as
well as the well-documented benefits of specializing in one industry setting. As we only used
participants from mid-tier firms, we cannot generalize our findings to the Big 4. However, it does
appear that auditors in the Big 4 may benefit from gaining industry experience in addition to the
benefits they enjoy from specialization.

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