Academic Instruction as a Determinant of Judgment Performance

Auditors evaluate the collectibility of commercial loans when they conduct financial audits of financial institutions. Task‐specific academic instruction and practice provide for acquisition of relevant credit analysis knowledge—but the relative benefits of academic instruction and practice versus training and practical experience remain unclear (e.g., Bonner and Walker 1994; Hammond 1996). First, loan judgments made by second‐year graduate business students completing an elective course in credit analysis are compared with judgments made by audit seniors with similar business experience but without any credit analysis training or experience. The graduate business students' judgments are significantly more accurate and less biased, with more consensus, given the criterion of the mean judgment of twelve highly experienced financial institution audit partners. Second, as a test of the benefits of academic instruction and practice versus CPA‐firm training and practical experience, the judgments of the graduate business students are compared with judgments provided by experienced auditors (seniors and managers): similar levels of judgment performance are indicated. Models of the loan judgments of the different groups of participants based on attributes of the borrower explain why the graduate business students performed especially well.