Task experience as a predictor of superior loan loss judgments

An area of significant importance and risk exposure during an audit of a fi nancial institution is assessing the uncollectible portion of the client's loan portfolio. Auditing the collectibitity of a commercial loan can be dif ficult because this complex judgment is semi-structured and many kinds of i nformation can be relevant. However timely judgment process and outcome fee dback are available and may improve the quality of an auditor's conclusions over time. Therefore, to test for the benefits of task-specific experience , I compare loan judgments provided by inexperienced seniors, experienced m anagers, and more experienced junior partners and senior managers to a crit erion based on the conclusions of senior audit partners. While previous res earch usually does not indicate performance improvements beyond the level o f an audit senior (e,g., Tan and Libby 1997) for this complex task with tim ely feedback, consistent and substantial performance improvements are repor ted here. Auditors provided increasingly more appropriate and less biased j udgments, and they achieved greater judgment consensus.