Learning from Experience in Performing Analytical Procedures

This study explores the reasons for the lack of correlation between experience and expertise which has been reported in several analytical review studies. It concludes that experience needs to be validated by identifying the process that mediates between the gaining of experience and the generation of knowledge. In addition, two conditions are identified, based on research edvidence from psychology and learning, that must be met in order to learn from one's experience. These conditions include the existnece of complete and unambiguous feedback.

The presence of these conditions is evaluated in the context of current audit practice. Based upon this examination, it is concluded that there is little opportunity for auditors to learn from experience in analytical review due to the following findings:

• Feedback regarding the effectiveness of analytical procedures is incomplete. Particularly, there is little opportunity for an auditor to learn about false negatives since there is little incentive to perform detailed follow-up investigations to determine the effectiveness of analytical procedures when those procedures signal a low risk of error.
• Feedback about the effectiveness of analytical procedures is not sufficiently timely and deterministic to be effective for learning. There frequently are many alternative explanations for a significant change in a ratio or trends which do not reflect an error or irregularity.

Recommendations are presented, including (a) the need for greater emphasis on the development of causal models in education, training and professional guidance, and (b) the need for the development., as part of a firm's quality control program, of a process for systematically obtaining relevant performance data for analytical procedures.

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