The Role of Tacit Knowledge in Auditor Expertise and Human Capital Development
JASMIJN C. BOL, CASSANDRA ESTEP, FRANK MOERS, MARK E. PEECHER
Journal of Accounting Research · 2018 · Volume 56 · Issue 4
Abstract
Two critical aspects of the model of auditor expertise development in Tan and Libby [1997] are that audit firms donotvalue tacit knowledge in inexperienced auditors butdovalue it in experienced auditors. We update the former and extend the latter. Our paper predicts and finds that audit firms nowdovalue 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.
Keywords
M40, M41, M42, M51, M52, tacit knowledge, audit expertise, performance evaluation, firm commitment
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