Fund managers retain trust in UK audited information

London, 10 February 2003

Confidence in UK audited information remains high despite the fallout from major corporate scandals in the US, research commissioned by the Institute of Chartered Accountants in England and Wales, has found.

A survey carried out by an independent market research company revealed that three in five (60%) UK fund managers and nearly three-quarters of US fund managers (74%) express "a great deal" or "a lot" of confidence in UK audited financial information.

Of the remainder, 30% of UK fund managers and 24% of their US equivalents say they have "some confidence". None of those questioned say they have no confidence at all and only 3% of UK fund managers and 2% of US fund managers state that they do not have very much confidence.

In contrast, UK fund managers are markedly less trusting of US audited financial information. Fewer than one in five (19%) have a "a great deal" or "a lot" of confidence in US information compared to three in five (60%) US fund managers.

To assess the impact that Enron and WorldCom may have had, researchers asked fund managers in both the UK and US whether their level of confidence has changed in the last twelve months.

For the majority, attitudes towards UK audited information have been unaffected, with half of UK fund managers and 71% of US fund managers reporting no change. Nearly one in four Americans (23%) and 14% of UK respondents claim to have more confidence in UK information than they did a year ago.

Only 1% of UK fund managers spontaneously mentioned the reliability of UK audited accounts as their biggest concern when deciding which companies to invest in.

Far larger concerns for UK fund managers are "earnings/growth potential of companies" (mentioned by 34%), "economic risk/global economy", (10%), "liquidity" (8%) and "profitability" (8%).

The study showed little demand for increased regulation of UK auditing. When asked to identify areas of improvement in UK audited information, fund managers priorities were increased transparency and disclosure and quarterly reporting. Only one US and five UK fund managers out of a total of 205 suggested that auditing should be separated from consultancy in the UK. Similarly, only three UK fund managers and one US respondent expressed an enthusiasm for rotating auditors in the UK.

Commenting on the research results, Andrew Ratcliffe, Chair of the Institutes Audit and Assurance Faculty, said: " The lack of demand among this group for major changes in UK auditing practice, or for greater regulation, provides backing for the measured approach to reform the Government has adopted."

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