This study provides experimental evidence related to the management of audit task knowledge. Specifically, the research explores whether a certain type of task knowledge, loan credit review knowledge, develops differently for in‐charge auditors working in different industry specializations. Since auditors are often asked to choose an industry specialization at the in‐charge level, understanding whether certain industries provide the opportunity for differential knowledge development is important (Libby and Frederick 1990), especially if such knowledge can be transferred to aid performance in tasks completed in several other industries. As such, the study explores whether the task knowledge under investigation can be transferred across both industry and task contexts to aid performance in the going concern judgment, a task that is required to be completed in all industries.
An experiment was administered to 60 in‐charge auditors from one of the then Big 6 firms, with 32 participants specializing in the financial services industry and 28 in manufacturing. Importantly, financial services auditors have extensive experience evaluating the collectibility of loans and the underlying financial condition of borrowers; this knowledge is expected to also be valuable in assessing the going concern of any client. Participants evaluated the going concern status of four cases of actual troubled clients from two industry settings: manufacturing and casino gambling. The findings support the transferability of knowledge across task and industry contexts. This result is important because it is the first study in the audit literature to demonstrate that a specific type of task knowledge can be transferred across both task and industry contexts (Be´dard and Chi 1993). In so doing, the results provide an important theoretical foundation for audit researchers and practitioners regarding the conditions for the transfer and dissemination of audit knowledge throughout a firm.