This study posits that there are differential opportunities for development of professional
judgment depending on a firm’s choice of the level of formalization. Task performance was
measured for four different tasks with two levels of complexity using auditors from two firms
differing in terms of formalization of audit approaches. The low-complexity tasks represent a
baseline comparison to mitigate the possibility that auditors from one firm simply perform better
than auditors from the other firm. If auditors from the two firms perform equally well on the experimental tasks when complexity is involved, formalization would not appear to be an important
factor in development of audit professionals’ ability to perform relatively complex tasks, which
require greater judgment and expertise. However, if one group of auditors outperforms the other
group, formalization may be a significant environmental factor in the development of auditors’
ability to perform complex tasks. Our results indicate that auditors from both firms performed
equally well on relatively simple tasks. However, auditors from less formalized firms outperformed
auditors from formalized firms on complex audit tasks. Differences in participant characteristics
(months of experience, motivation, and ability) did not explain between-firm differences in auditor
performance.