In Changing Times, Five Points of Light for Markets

As 2017 approaches, we face a period of uncertainty. With a new administration and U.S. Congress, policy changes lie ahead. The economic impact of those changes—good, bad, or indifferent—remains to be seen.

In times like these—where there's so much that we don't know—it can be helpful to take stock of what we do know. So here are five points of light from the perspective of the public company auditing profession. Public company auditors can and should feel very good about these points. I believe investors and anyone with an interest in the capital markets also should be reassured by these developments.

1. Investor confidence remains robust.

Through both political changes and economic ups and downs, Americans have shown an enduring and positive view of the U.S. capital market system. How do we know? Since 2007, the CAQ has commissioned an annual survey of U.S. investors on key confidence measures. We call it our Main Street Investor Survey, as it targets only retail investors. This year's edition of our survey was our 10th, and it revealed the following. In 2016:

• Seventy-nine percent of American investors expressed confidence in U.S. capital markets.
• Eighty-one percent said they were confident in investing in U.S. publicly held companies.
• Three-quarters of investors showed confidence in audited financial information released by public companies.
• Investors are also strongly confident in many of the entities that have a role in investor protection, including auditors and audit committees. 

For more, read the full survey, which you can download at no charge here.

2. Financial restatements continue to decline.

While just one indicator, trends in financial restatements are a positive trend in financial reporting. Earlier this year, Audit Analytics released research showing that overall restatements have steadily trended down since 2008. Last year, overall restatements dropped by 14 percent. What's more, Audit Analytics found that the severity of restatements had declined across all major criteria, such as the negative impact on net income, the average number of days restated, and the average number of accounting issues identified. Visit the Audit Analytics website for more perspective.

3. Transparency around the audit process and audit oversight continues to grow.

Around the world, investors and other stakeholders have shown keen interest in learning more about the audit process. There are indications that transparency around the audit is increasing. Last month, the CAQ and Audit Analytics jointly released our third edition of the Audit Committee Transparency Barometer. In essence, the Barometer gauges how audit committees approach the public communication of their responsibility to oversee the external auditor. It measures the robustness of related proxy disclosures for companies in the S&P 1500. This year's Barometer shows that from 2014 to 2016, there has been double-digit growth in the percentage of companies disclosing information in key areas of external auditor oversight. You can download the full Audit Committee Transparency Barometer on the CAQ website.

4. The auditing profession continues to foster dialogue on key issues.

In our dynamic and evolving capital markets, there will never be a shortage of challenging issues. As I see it, key market participants, including the public company auditing profession, are rising to these challenges as never before through dialogue and action.

For example, consider one extremely challenging issue: cybersecurity. Given the immense scale and complexity of cybersecurity, every sector of the economy, public and private, must do its part to promote cybersecurity resilience. Through initiatives like National Cyber Security Awareness Month, stakeholders are coming together and sharing views. The auditing profession certainly has been advancing the discussion about cybersecurity risk management, and stay tuned for more from the profession on this front in 2017 and beyond. Visit the AICPA's Cybersecurity Resource Page to learn more.

5. More than ever, auditing is a great career.

Simply put, there has never been a better time to have a career in the auditing profession. New technology, such as greater use of data analytics and artificial intelligence, continues to change the way auditors work, making the audit stronger and better. Meanwhile audit firms continue to be leaders when it comes to offering innovative and inclusive workplaces. You can discover resources on careers in auditing at www.discoveraudit.org.

And here's one more point to add ahead of the holidays: I wish you, my readers, a pleasant holiday season and a happy new year. As always, I invite you to share your thoughts in the comments.

A securities lawyer, Cindy Fornelli has served as the Executive Director of the Center for Audit Quality since its establishment in 2007.