Investors trust auditors, but confidence in U.S. markets drops

Public company auditors remain the group investors trust most to protect their interests, but investors’ confidence in U.S. capital markets and U.S. public companies has dropped in the past year, according to a Center for Audit Quality (CAQ) survey report released Tuesday.

Respondents to the Main Street Investor Survey kept independent auditors of publicly traded companies in the top spot among entities they trust most to look out for investors. More than four in five (81%) respondents said they have some, quite a bit, or a great deal of trust in public company auditors. That’s a dip of three percentage points from 2017, and it narrowly edges out independent audit committees of public companies (80%) for the top spot among the most-trusted entities.

“The public company auditing profession works hard each day to build investor confidence, and we are pleased to see that a strong majority of investors view independent auditors as effective parts of the system of investor protection,” CAQ Executive Director Cindy Fornelli said in a news release.

In descending order, other most-trusted groups were financial analysts (79%), stock exchanges (77%), financial advisers and brokers (75%), and credit rating agencies (71%).

The survey performed by the CAQ, which is affiliated with the AICPA, went to 1,100 adults who are primary or shared decision-makers in their households’ finances and who possess at least $10,000 in investments.

Among those investors, confidence in U.S. capital markets dropped 11 percentage points to 74% from the all-time high posted in the 2017 survey. Respondents who said they are confident in U.S. capital markets said the economy is growing and will continue to get better (19%) and said the U.S. stock market is performing well (16%). An additional 13% of those with a favorable view of U.S. capital markets cited their confidence in the Trump administration.

That confidence was not shared by everyone. More than one-third (38%) of those who said they have little or no confidence in U.S. markets cited a lack of leadership by the Trump administration. Another 20% of those who lack confidence in U.S. markets cited fear of a trade war or uncertainty about the status of free trade agreements.

Investor confidence in U.S. public companies fell five percentage points from 2017 to 78%. Those who expressed confidence in U.S. public companies most often said that the U.S. economy is performing well and the U.S. stock market historically bounces back. Respondents who expressed little or no confidence in U.S. public companies most commonly said only certain people benefit when U.S. public companies perform well, cited unethical practices, or said U.S. companies are exporting too many jobs overseas.

Three-quarters of respondents to the Main Street Investor Survey said they have some, quite a bit, or a great deal of confidence in audited financial information. Although that’s down three percentage points from the previous year, it’s the third time in the past five years that this confidence metric has measured exactly 75%.

“Investor confidence is a pillar of healthy capital markets,” Fornelli said. “The independent financial statement audit helps give millions of Americans the confidence to invest in public companies so they can save for retirement, pay for their children’s education, and fuel our nation’s economic growth.”

— Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is the JofA’s editorial director.