THE EFFECTS OF INSTRUCTION AND EXPERIENCE ON THE ACQUISITION OF AUDITING KNOWLEDGE

Libby (1993) suggests a simple model of the acquisition of expertise w here knowledge and ability determine performance, and instruction, exp erience, and ability determine the acquisition of knowledge. An import ant implication of the model is that a detailed understanding of the k nowledge acquisition process is needed before the practical implicatio ns of expertise research are evident (see also Bonner and Pennington 1 991; Waller and Felix 1984). Libby's review indicates, however, that t he vast majority of studies of the knowledge acquisition process focus on what knowledge auditors acquire during a particular period of time with the firm, but not on what particular aspects of instruction and experience lead to superior knowledge.1 The latter type of study is ne cessary before firms can determine how best to organize auditors' trai ning and experiences to allow efficient and acquisition of the necessa ry knowledge. The importance of analytical procedures in auditing and the popularity of ratio analysis as an analytical procedure are well-d ocumented (e.g., Biggs and Wild 1984; Libby 1985). The current study f ocuses on the knowledge necessary to perform ratio analysis in audit p lanning. Specifically, we examine the effectiveness of various combina tions of instruction and experience (practice and feedback) in produci ng this knowledge. The results indicate that combinations of instructi on and no experience or of instruction and practice without feedback d o not produce knowledge. Practice with explanatory feedback and any fo rm of instruction creates gains in knowledge, but may not always be av ailable in the audit environment. Practice with outcome feedback, on t he other hand, does not assist in the acquisition of knowledge unless it is preceded by instruction with what we have labeled ''understandin g rules,'' making this combination appear to be an adequate substitute for explanatory feedback. Practice with outcome feedback combined wit h what we call ''how-to rules'' does not promote knowledge acquisition . Finally, results indicate that ability aids in the acquisition of kn owledge, and that this knowledge is related to performance in ratio an alysis. These findings have implications for audit effectiveness and e fficiency, and for education and firm training related to ratio analys is. If explanatory feedback can be replaced by a combination of unders tanding rules and practice with outcome feedback, audit efficiency cou ld be increased since explanatory feedback takes more time and more ex perienced personnel. Explanatory feedback may also be inaccurate or un available, particularly under conditions of time pressure. However, if only outcome feedback is to be provided for ratio analysis, understan ding rules must be incorporated into education and training. For the m ost part, firm training and university education currently provide onl y how-to rules ratio analysis (see Bonner and Pennington 1991; Ernst & Whinney 1986). The ideas described above could also be extended to ta sks other than ratio analysis for which outcome feedback is available (Solomon and Shields 1993).