AUDITORS KNOWLEDGE ORGANIZATION - OBSERVATIONS FROM AUDIT PRACTICE AND THEIR IMPLICATIONS

When public accounting firms engage in activities to improve their aud iting methods, observations are often made about ways in which auditor s make decisions. These observations could be useful to both the audit ing research and practice communities, but are rarely communicated in academic journals. This paper offers insights about the organization o f experienced auditors' knowledge, based on two observations made duri ng the process of knowledge elicitation for development of Risk Adviso r(sm), an expert system for audit risk assessment. Both observations d iffered from previous experience in developing ExperTAX(sm), an expert system for income tax accrual and planning, and have implications for auditing research and practice. The first observation was that audito rs queried to develop the knowledge base for Risk Advisor had difficul ty expressing generalized rules for risk assessment. This may imply a ''client-centered'' organization for knowledge relevant to that task. Second, an unexpected ''framing'' effect was observed. Negative wordin g used in statements designed to elicit client knowledge (i.e., asking the auditor to recall facts supporting a statement indicating a clien t problem) tended to improve recall and integration of facts, relative to positive or neutral statements. The paper relates both observation s to theoretical and empirical research on auditor knowledge, explores implications for audit practice, and suggests topics for further stud y.