Public companies reining in costs, according to audit partners

By Kevin Brewer

More public companies are reducing headcount capacity, and fewer are increasing employee compensation and benefits, according to a recent survey of audit partners conducted by the Center for Audit Quality (CAQ).

The CAQ's Spring 2023 Audit Partner Pulse Survey found that concerns over labor shortages as an economic risk have decreased significantly over the past year — from 53% to 35% — according to the responses of 588 audit partners based on their public company audits. The CAQ is affiliated with the AICPA.

While audit partners observed that companies are taking more actions like reducing headcount capacity and upskilling current employees, they are taking fewer actions such as increasing flexibility in workplace location, increasing compensation, and expanding employee benefits.

"We have observed a very significant shift, especially with regards to talent and labor," CAQ CEO Julie Bell Lindsay said. "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."

Help (not as) wanted

Reducing headcount is the top human capital action this spring at 45%. That's up from 8% this time last year. Upskilling current employees is up 17 percentage points to 43%.

Conversely, while 73% of businesses were increasing compensation last spring, that number has been cut in half — down to 35% this year. Increasing flexibility in workplace location is at 41%, down from 75% last spring. Expanding employee benefits dropped 14 percentage points to 16%.

"The changes indicate a shift in power from employees to management in the current moment," according to the survey, "with management's focus shifting to reining in costs and improving efficiency."

A negative outlook

More than 80% of audit partners were pessimistic or neutral about the U.S. economy over the next 12 months, according to the survey. Inflation was the largest economic risk facing public companies according to audit partners for the second consecutive year, followed by cybersecurity threats and regulation. Labor shortages and supply chain issues rounded out the top five, but both were down significantly from a year ago.

Overall, organizations are focusing on cost management and financial performance over other areas like talent and labor.

Accountant shortage cited

Eighty-five percent of audit partners said that companies they audit were somewhat to greatly affected by a shortage of accountants, with the financial services and technology sectors being most affected.

Companies valued at less than $1 billion were more affected than larger companies.

"The challenges facing smaller companies may be a matter of relying more on employees to handle routine accounting functions that larger companies have been able to automate through investments in new technologies," according to the survey.

Other areas of note:

  • Cybersecurity. Cybersecurity persists as a top risk, but there is reason for optimism: 54% of partners said that communication between boards and public company management on this topic is improving.
  • U.S.-China relations. Most businesses (69%) are not exposed to risks associated with China, according to audit partners. Of those who did report that organizations in their industry sector had exposure to China, top risks included supply chain disruption, protection of intellectual property, and risks from U.S.-government-imposed restrictions.
  • Cryptocurrency. Audit partners said that plans to adopt cryptocurrency as a form of payment fell by 10% across industries since spring 2022. The biggest drop-offs were in the financial services, consumer products and retail, and technology industries.
  • Artificial intelligence (AI). Forty-seven percent of businesses are already using AI. Key uses observed include process automation, customer experience, service and support, and predictive analysis.

— To comment on this article or to suggest an idea for another article, contact Kevin Brewer at

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