May 19, 2023

May 2023 Audit Partner Survey

Audit Partners Pessimistic on U.S. Economic Outlook as U.S. Businesses Continue to Face Inflation, Cybersecurity Risks

Washington DC, May 19, 2023 – Audit partners are pessimistic about the outlook for
the U.S. economy as U.S. businesses continue to face inflation, cybersecurity risks, and
increased regulation, according to the Center for Audit Quality (CAQ’s), Audit Partner
Pulse Survey, a biannual survey of U.S. public company audit partners. The survey
provides independent and objective perspectives on a range of topics, including the
overall health of the economy and business transformation.

The survey found that organizations are prioritizing cost management and financial
performance over other areas like talent and labor. “We have observed a very
significant shift, especially with regards to talent and labor,” said Julie Bell Lindsay,
Chief Executive Officer, CAQ. “While organizations were focused on attracting and
retaining talent a year ago at the height of ‘The Great Resignation,’ reducing headcount
is the top human capital action audit partners are observing within U.S. businesses

The nature of their work gives audit partners unique insights across a broad spectrum of
industries and corporate trends. Below are key findings from their observations.

Audit partners’ outlook for the economy remains pessimistic

  • Fewer than 1 in 5 audit partners are optimistic about the economy.
  • Top audit partner concerns driving this pessimism include inflation (the top
    concern for the second year in a row), cybersecurity threats, and regulation (a
    10-point increase since Spring 2022).

Attracting new talent no longer a focus

  • Notably, concerns over labor shortages significantly decreased since Spring
    2022 (falling by 18 percentage points).
  • While top human capital actions observed by audit partners a year ago were
    increasing flexibility in the workplace and increasing compensation, these steeply
    declined as priority human capital actions by Spring 2023 (a drop in 34 and 38
    points, respectively).
  • Rather, U.S. businesses reported reducing headcount as the top human capital
    action taken in Spring 2023 (a 37-point increase since Spring 2022). Audit
    partners in the financial services and technology sectors most frequently
    observed this human capital action.
  • Top priorities at U.S. organizations in Spring 2023 were cost management (61%)
    and financial performance (51%).

Emerging risks and technology shifts

  • Cybersecurity remains a top risk at U.S. organizations according to 39% of audit
    partners surveyed. The partners observed that organizations remain only
    moderately prepared for a cyberattack, though 54% of partners did note that
    communication between boards and public company management on this topic
    is improving.
  • Cybersecurity was also reported as a top ESG priority for U.S. businesses, with
    55% of partners ranking it as the top short-term priority, and 48% of partners
    ranking it as the top long-term priority at organizations.
  • Most U.S. businesses are not exposed to risks associated with China, according
    to 69% of the audit partners surveyed. Of the partners who did report that
    organizations in their industry sector had exposure to China, top risks included
    supply chain disruption (59%), protection of intellectual property (43%) and risks
    from U.S.-government-imposed restrictions (39%).
  • Audit partners observed that plans to adopt cryptocurrency as a form of payment
    fell by 10% across industries since Spring 2022, with steeper drop-offs observed
    in financial services (18 percentage points), consumer products and retail (14
    percentage points), and technology (13 percentage points) industries.
  • A new survey question revealed that 47% of U.S. businesses are already using
    artificial intelligence (AI) to some extent. Key uses observed include process
    automation (63%), customer experience, service and support (44%) and
    predictive analysis (31%).

The accountant shortage

  • Amid resignations and pipeline challenges, 89% of audit partners reported U.S.
    businesses were greatly to somewhat affected by the accountant shortage. Audit
    partners in financial services and technology, as well as audit partners working
    with companies valued at less than $1 billion, were more likely to report
    organizations in their industry sector as being affected than other audit partners
    working within different industries and with larger organizations.

Download the report, Spring 2023 CAQ Audit Partner Pulse Survey, to access the full
survey results.

About the Center for Audit Quality

The Center for Audit Quality (CAQ) is a nonpartisan public policy organization serving
as the voice of U.S. public company auditors and matters related to the audits of public
companies. The CAQ promotes high-quality performance by U.S. public company
auditors; convenes capital market stakeholders to advance the discussion of critical
issues affecting audit quality, U.S. public company reporting, and investor trust in the
capital markets; and using independent research and analyses, champions policies and
standards that bolster and support the effectiveness and responsiveness of U.S. public
company auditors and audits to dynamic market conditions.