Email versus In-Person Audit Inquiry: Recent Research and Additional Survey Data Free

Audit partners have expressed concerns about staff auditors' tendency to use email for inquiries with client personnel. These concerns include whether junior auditors will effectively create relationships with clients (Westermann, Bedard, and Earley 2015) and whether junior auditors will notice deception cues in client behavior (Bennett and Hatfield 2018). Further, there are reasonable concerns that email communication could increase legal liability (Robertson and Unger 1997; Vandermeer 2006). Despite partner concerns, staff auditors express a stronger preference for using email for various client inquiries compared to audit partners and managers (Bennett and Hatfield 2018). In fact, in a recent survey of staff auditors, Carlisle, Hamilton, and Rasso (2018) find that staff auditors report using email for nearly half of all communications with clients.

In response to these concerns, audit researchers have begun to investigate the effects of different communication modes for audit inquiry. Bennett and Hatfield (2013) find that there may be benefits to allowing junior auditors to use email for client inquiries. Specifically, they find that, if a junior auditor is allowed to use email for inquiry, the auditor is more likely to request additional documentation from the client compared to an in-person request. Bennett and Hatfield (2013) suggest this occurs because junior staff auditors are intimidated by more senior client personnel and feel more comfortable requesting additional documentation via email than in person. Carlisle (2018) suggests that auditors may be more persuaded by an in-person client response than an email response. Similarly, Hawkins (2017) suggests that greater social presence inherent in face-to-face communication leads novice auditors to exhibit reduced skeptical actions.¹ Together, these findings suggest that auditors benefit from using email for communication compared to in-person requests.

In contrast, other studies have demonstrated the benefits of in-person communication. Bennett and Hatfield (2018) find that junior auditors presented with non-verbal deception cues in a face-to-face communication are more skeptical than junior auditors who engage in email communication. They also find that, although junior auditors request more documentation in email requests (replicating their 2013 finding), junior auditors ask more follow-up questions and engage in more back-and-forth communication in person. On the client side of the communication, Saiewitz and Kida (2018) find that clients who receive an email audit inquiry provide responses that are more biased toward information that supports their pre-existing accounting position as compared to clients who receive an in-person request.²

Together, Saiewitz and Kida (2018) and Bennett and Hatfield (2018) suggest that auditors will elicit higher quality responses from clients in person compared to via email, both in response to the initial request and as a result of the auditor asking more follow-up questions. Although Carlisle (2018) and Hawkins (2017) suggest that auditors will be more persuaded by clients in person than via email, their studies do not vary the content of the client's response, even though the client's response is likely higher quality in person. Accordingly, their concern that an auditor will be more persuaded in person than via email may be less of an issue when the auditor receives a higher quality response (i.e., a less biased, more informative response) in person.

In this study, I report two surveys where I further investigate clients' perceptions regarding the auditor's communication mode.³ I find that clients consider the auditor's request to be more important and more urgent when asked in person than when sent via email. Clients also feel they have more time to carefully craft a response to support their company's preferred reporting position via email than in person. Although I find that clients think the auditor will question their response at similar rates via email or in person, clients expect to be questioned more quickly in person compared to email if the client is too aggressive in their response to the auditor.

Interestingly, although audit partners have expressed concerns that email can affect the relationship between the client and auditor, I find no statistical differences between email and in person requests in the degree to which clients liked the auditor, how competent they thought the auditor was, or their willingness to work with the auditor or the audit firm again. However, I note that Saiewitz and Kida (2018) find that clients report feeling more annoyed with the auditor when they receive an email request compared to an in-person request. These negative feelings toward the auditor could build over time and, ultimately, could have long-term effects on auditor-client relationships.

Finally, I find that clients prefer to receive email requests as often as in-person requests, which means clients are likely to request that auditors use email for inquiry on a somewhat regular basis. Since the prior research reviewed above and the results of this study suggest that clients may use email to carefully craft a biased, more aggressive response to auditor inquiries, this client preference for email could have negative consequences for audit outcomes.

Forty-six experienced business professionals responded to the primary survey (“Survey 1”), which examines client reactions to an auditor's communication mode.⁴ These participants were enrolled in a part-time M.B.A. program at a large public university in the Northeast. The program primarily includes upper- and mid-level managers in both financial and operations positions across a wide range of industries. On average, participants were 34 years old (s.d. = 7.36), with nine years' business experience (s.d. = 6.58) and five years' managerial experience (s.d. = 5.96). Twenty-three percent were female.⁵

I also report a survey about communication usage and preferences (“Survey 2”). This data was collected as part of the post-experimental questions in the study conducted by Saiewitz and Kida (2018). Participants in this survey were 183 experienced business professionals from the same part-time M.B.A. program.⁶ On average, Survey 2 participants were 37 years old (s.d. = 9.60), with 12 years' business experience (s.d. = 7.72) and 6 years' managerial experience (s.d. = 5.97). Thirty-two percent were female.

In Survey 1, participants assumed the role of a client manager at a technology company who receives an auditor request for information about a potential inventory obsolescence issue. To investigate whether clients' perceptions differ depending on whether they receive an email or in person request, I manipulated whether participants are told that the auditor contacts them via email or in person.⁷ The survey included seven statements regarding participants' perceptions of the inquiry and how they can respond to the inquiry. Participants were asked to indicate their level of agreement with each survey item on a nine-point scale anchored with 1 = Strongly DISAGREE and 9 = Strongly AGREE, with the midpoint 5 = Neither Agree nor Disagree. The survey items and related results are presented in Table 1. In Survey 2, participants provided an estimate of the percentage of time they use different communication modes for business communication, as well as the percentage of time they would prefer to receive requests for information via specific communication modes.⁸ The questions and related results are presented in Table 2. I discuss the results for both surveys in the next section.

In the first two survey items (Items 1 and 2 in Table 1), I asked participants their level of agreement with statements that the issue was important and urgent, given they received the request via email or in person. As shown in Table 1, participants who received an in-person request viewed the request as more important than participants who received an email request (means = 7.48 and 5.52, respectively, p < 0.001).⁹ Similarly, in-person condition participants viewed the request as more urgent than email condition participants (means = 6.74 and 4.39, respectively, p < 0.001). It is also possible to gauge how important and urgent participants perceived the request by comparing responses to the neutral scale midpoint (midpoint = 5). While the in-person condition participants viewed the issue as highly important and urgent (i.e., their responses to both items were significantly above the neutral midpoint, p < 0.001), the email condition participants only viewed the request as slightly important (i.e., their responses were marginally above the midpoint, p = 0.097) and they did not view the request as urgent (i.e., their responses were marginally below the midpoint, p = 0.064).

Item 3 results indicate that email condition participants clearly felt they have more time to respond to the request than in-person request participants (means = 6.74 and 4.00, respectively, p < 0.001). In fact, the mean for the in-person condition participants was significantly below the neutral midpoint (mean = 4.00, p = 0.008), indicating they significantly disagreed that they had more time to respond to an in-person request compared to an email request, while email condition participants were significantly above the neutral midpoint (mean = 6.74, p < 0.001), indicating they strongly agreed they had more time to respond to an email request compared to an in-person request.

Item 4 investigates whether participants think they can more carefully craft a response to an email request versus an in-person request. Participants in the email request condition were significantly more likely to agree that they could carefully craft an argument to support their company's preferred reporting position compared to participants in the in-person request condition (means = 7.43 and 4.48, respectively, p < 0.001). Interestingly, participants in the in-person request condition neither agreed nor disagreed with the statement that they could more carefully craft a response to an in-person request compared to an email request (i.e., the mean of 4.48 is not statistically different from the neutral midpoint, p = 0.266), while email condition participants strongly agreed they could more carefully craft a response via email than in person (i.e., the mean of 7.43 is significantly above the neutral midpoint, p < 0.001). This implies that those who received an in-person request may not have given much thought to crafting their response, while those who received an email request recognized that the communication mode gave them the opportunity to carefully craft a response to the auditor. Most importantly, these results suggest that a client might express a preference for receiving an auditor inquiry via email when dealing with sensitive issues that require a carefully crafted response. Audit firms can leverage this knowledge to ensure staff auditors understand why it is important to request information in person rather than via email, especially for issues that are sensitive or high-risk.¹⁰

In Item 5, I investigate participants' perceived likelihood of receiving follow-up questions from the auditor. In-person request participants and email participants did not statistically differ in their agreement with whether the auditor would ask follow-up questions (means = 6.39 and 5.74, respectively, p = 0.255). Both sets of participants agreed that it was more likely the auditor would ask follow-up questions via the participants' assigned communication mode as compared to the alternative communication mode (i.e., both means are significantly above the neutral midpoint, p < 0.05). It is likely that participants were responding to the overall likelihood they would receive follow-up requests in general, rather than comparatively between communication modes. Therefore, I find no statistical evidence that participants expect to be questioned by the auditor more via email or in person. This result is particularly interesting, as it shows that clients think auditors are no more likely to ask follow-up questions via email or in person, even though Bennett and Hatfield (2018) find that staff auditors are more likely to ask follow-up questions in person than via email.

In Items 6 and 7, I investigate whether participants think the auditor will question an aggressive or self-serving response more quickly when it is made via email or in person. Participants in the in-person request condition were slightly more likely than email participants to think the auditor would question them more quickly if they were too aggressive in their response (means = 5.78 and 4.91, respectively, p = 0.093), while there was no statistical difference between in-person and email participants on whether the auditor would question their response if they were too self-serving (means = 5.61 and 5.43, respectively, p = 0.712). Interestingly, in both cases, participants in the email condition did not see a difference between communication modes in how quickly the auditor would question an aggressive response (i.e., the mean of 4.91 does not differ from the neutral midpoint, p = 0.796) or a self-serving response (i.e., the mean of 5.43 does not differ from the neutral midpoint, p = 0.179). However, those who received an in-person request marginally agreed they would be questioned more quickly in person compared to email if they were too aggressive (i.e., the mean of 5.78 is marginally higher than the neutral midpoint, p = 0.053) or if they were too self-serving in their responses (i.e., the mean of 5.61 is marginally higher than the neutral midpoint, p = 0.095). However, I caution against over-interpretation due to the weak results for the in-person condition participants and because, as noted above, the difference between the in-person and email participants was only marginally significant for an aggressive response (p = 0.093) and did not statistically differ for a self-serving response (p = 0.712).

Overall, I interpret the results for Items 5–7 to suggest that clients are likely to think the auditor will ask follow-up questions regardless of communication mode, but they are somewhat more likely to think the auditor will question them if they are too aggressive in their response to an in-person request compared to an email request. This suggests that clients may be hesitant to respond aggressively to an in-person request as compared to an email request, consistent with Saiewitz and Kida (2018) who find that clients provide responses that are less biased toward information that supports the client's aggressive accounting position in response to an in-person request compared to an email request. The results of Survey 1, together with findings from Saiewitz and Kida (2018) and Bennett and Hatfield (2018), suggest that auditors can use in-person requests to elicit higher quality responses from clients.

Although there are clear reasons for an auditor to request information in person rather than via email, clients often express a preference for receiving email requests. In Table 2, I report responses to two questions in which experienced business professionals indicated what percentage of the time they actually use various communication methods and what percentage of the time they would prefer to receive requests for information via these communication methods. As shown in Table 2, percentages for use and preferences were comparable. In this section, I focus on the preference responses since this suggests which communication mode the client may request that the auditor use.

There was a clear preference for both in-person requests (35.3 percent of the time) and email requests (37.1 percent of the time). Although the email request preference was numerically higher than the in-person request preference, these amounts were not statistically different from each other (t₁₈₂ = 0.55, p = 0.584, untabulated). The next highest preference was for phone requests (17.9 percent of the time). Instant messaging/text messaging had a low preference rate (6.9 percent) while video requests (e.g., Skype) had the lowest preference (2.9 percent). Overall, this suggests that clients would prefer to receive an email at least as often as an in-person request, and much more than they would like to receive a phone request, instant message, or video request. Seeing as participants in Survey 1 indicated a belief that email allows more time to respond and a greater opportunity to craft their responses, clients hoping to persuade or mislead the auditors may encourage auditors to use email to request information. Accordingly, it may be in auditors' interest to insist on in-person communication, particularly when communicating about sensitive or high-risk information.

Finally, partners have expressed concerns about whether using email for audit inquiries might impede relationship-building with clients (Bennett and Hatfield 2018; Westermann et al. 2015). In reviewing results from the post-experimental questions from Saiewitz and Kida's (2018) experiment, I find no differences across communication modes in how much participants liked the staff auditor or how intelligent, competent, or respectful they found the auditor to be (smallest p = 0.340, untabulated). Further, there were no differences across communication modes regarding whether they would want to work with the staff auditor or the audit firm again (smallest p = 0.532, untabulated). However, as reported in Saiewitz and Kida (2018), participants were more annoyed and frustrated with the auditor when he made his request via email versus in person. It is possible that, over time, this frustration and annoyance could have a long-term effect on the auditor-client relationship. Future research will need to investigate this potential consequence.¹¹

Audit partners have expressed concerns about staff auditor use of email for audit inquiries. As reviewed here, initial studies regarding the impact of email use provide mixed evidence. Some studies demonstrate a benefit of email use. Specifically, Bennett and Hatfield (2013) find that staff auditors are more likely to request documentation from senior client personnel when allowed to use email, while Carlisle (2018) and Hawkins (2017) suggest that auditors are less likely to be persuaded by clients over email versus in person. However, other studies demonstrate negative effects of email use. Bennett and Hatfield (2018) find that staff auditors are less likely to ask follow-up questions when using email compared to in person, while Saiewitz and Kida (2018) find that client responses to email requests are more biased toward information that supports their aggressive accounting position compared to responses to in-person requests. Together, these two studies suggest that auditors will obtain a higher quality information set from clients when conducting inquiry in person compared to via email.

In this paper, I present further evidence that clients view in-person requests as more important and urgent than email requests. Clients also believe they can more carefully craft their responses to support their company's preferred reporting position via email as compared to in person, and they generally prefer email requests as often as in-person requests. While clients thought the auditor would ask follow-up questions both in person and via email, I find some evidence that clients feel the auditor will question an aggressive response more quickly in person than over email. This suggests that clients may be less aggressive in their response to an in-person request compared to an email request.

Overall, these findings suggest that even though staff auditors are more comfortable using email, firms should find ways to help staff gain more comfort with in-person inquiry in order to receive higher quality responses from clients. However, audit firms should also be cognizant of Carlisle's (2018) and Hawkins' (2017) findings that auditors might be more persuaded by clients in person. Of course, firms should stress the importance of applying professional skepticism to all client inquiry responses, regardless of communication mode. Researchers can also consider leveraging theory to identify additional ways for auditors to apply heightened professional skepticism to both in-person and email responses, as well as to identify additional tactics to elicit higher quality responses from clients.

Inquiry is an efficient means of gathering evidence, although it is not adequate to limit procedures to inquiry alone (Messier, Glover, and Prawitt 2017). However, as AU-C 500 notes, inquiry is an important procedure that can often uncover information that contradicts documentary evidence (AICPA 2016). Accordingly, it is an important area for further research, and audit researchers look forward to working with audit firms to investigate ways to improve the audit inquiry process.