Auditing firm partners are feeling pessimistic about the outlook for the U.S. economy, according to a survey released Friday by the Center for Audit Quality, as businesses confront issues like inflation, cybersecurity risks, and greater regulation, not to mention the possibility of a default by the Treasury.
The CAQ’s biannual Audit Partner Pulse Survey indicated that organizations are prioritizing cost management and financial performance over talent and labor.
“We have observed a very significant shift, especially with regards to talent and labor,” said CAQ CEO Julie Bell Lindsay in a statement. “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 today.”
Courtesy of the Center for Audit Quality
The survey found fewer than one out of five audit partners are optimistic about the economy. The main audit partner concerns behind 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).
Concerns about labor shortages have significantly dropped since spring 2022 (dropping 18 percentage points). While the top human capital actions cited by audit partners a year ago were increasing flexibility in the workplace and increasing compensation, these dramatically declined as priority human capital actions by spring 2023 (a drop in 34 and 38 points, respectively).
Instead 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 who work with clients in the financial services and technology sectors most frequently observed this human capital action. The top priorities at U.S. organizations in spring 2023 were cost management (61%) and financial performance (51%).
Cybersecurity, ESG, China and crypto
Cybersecurity still ranks as the top risk at U.S. organizations according to 39% of audit partners polled by the CAQ. 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 cited 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 placing it as the top long-term priority at organizations.
Most U.S. businesses aren’t exposed to risks linked with China, according to 69% of the audit partners polled. Of the partners who did say organizations in their industry sector had exposure to China, the top risks included supply chain disruption (59%), protection of intellectual property (43%) and risks from U.S.-imposed restrictions (39%).
Plans to adopt cryptocurrency as a form of payment fell by 10% across industries since spring 2022, according to the auditors polled, with sharper declines seen in financial services (18 percentage points), consumer products and retail (14 percentage points), and technology (13 percentage points) industries.
AI and the accountant shortage
A new survey question asked about artificial intelligence, showing that 47% of U.S. businesses are already employing AI to some extent. The main uses cited include process automation (63%), customer experience, service and support (44%) and predictive analysis (31%).
With all the resignations and pipeline issues they’re confronting, 89% of the audit partners polled indicated U.S. businesses were greatly to somewhat affected by the accountant shortage. Audit partners who work with clients 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.
The full survey results can be found here.
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