Date posted: 15/09/2021 5 min read

Do investors trust auditors?

Auditors have worked hard to maintain and grow trust in what we do, and this is being acknowledged.

In brief

  • Trust in audited financial information continues to grow
  • The past year has reinforced the importance of accurate financial reporting
  • Investors see climate change and sustainability information as important to their decision making

When Chartered Accountants Australia and New Zealand did its first survey of retail investor confidence in Australia and New Zealand three years ago, none of us could have predicted the ways confidence would be tested.

Fake news, political upheavals and the economic stresses of the COVID-19 pandemic have all contributed to the public, and investors, being increasingly doubtful about the information they receive. 

The audit profession is one of the stakeholders tasked with helping to maintain confidence through the assurance auditors provide, and they remain at the top of the list of the groups that retail investors trust. If investors lose faith in audited financial information, the consequences for companies and markets would be very difficult to repair.

Thankfully, that trust has grown over the three years we have been doing this survey (AU: 2019 43%; 2020 51%; 2021 53%; NZ: 2019 55%; 2020 58%; 2021 58%). 

This research has helped bring vital context and clarity to discussions with governments and regulators. The Australian Parliamentary Inquiry into the Regulation of Audit considered this research in its assessment of how audit is performing in Australia, and ASIC has incorporated the findings into its suite of Audit Quality Indicators. 

In a media climate often looking for, and focused on, bad news when it comes to corporates and auditing, this research has helped bring a reality check and facts about the confidence of investors into the conversation. The results have been reported in The Australian, Radio NZ, The Australian Financial Review, NZ Herald and other major titles.

During the pandemic, the importance of accurate financial reporting has been driven home. First, because it helps companies navigate the upheavals. Second, because having audited financial reporting and disclosures allows them to communicate with their investors, communities and other stakeholders in a clear and meaningful way. 

Having audited financial reporting and disclosures allows them to communicate with their investors, communities and other stakeholders in a clear and meaningful way.

Transparency in reporting is helping businesses survive. Confidence in public companies and their audited financial reports has bounced back.

Investor confidence opinion piece

But the pandemic isn't the only issue we're facing. Climate events continue to occur around the world, and people are looking for companies to behave responsibly to help fight climate change and employ other sustainable business practices around ethics, culture, and risk management.

Concern about climate change is growing fast among investors, as are concerns over other emerging risks such as cyber security. The research shows that more than half of investors consider climate change and sustainability information important to their investment decision making.

But it also told us that most of them are currently getting that information from media and company websites rather than the dedicated reporting being prepared. Unsurprisingly, most of them told us their confidence in sustainability reporting would increase if it was subject to independent assurance.

Investors trust auditors because we have worked hard to maintain and grow our trust. Auditing is a profession, not an industry. We come together as a profession to hold ourselves to standards in relation to how audits are performed, the wide-ranging skills our members require, and our ethical standards.

We have grown that profession over generations, doing our best to adapt and evolve as business does. Auditors aren't perfect, but the profession is always working hard to improve and to fulfil the role we play in protecting public interests when it comes to financial and other forms of reporting, capital markets and the community. We can't take the trust that the public has in us for granted. 

We must continue to demonstrate our ethics and integrity every day and in every challenge. It's not just a compliance exercise, and the confidence investors place in us continues to demonstrate that.

Read the reports

The 2021 Retail Investor Confidence reports for Australia and New Zealand.

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