Financial Statement Audit Trends for Asset Managers

For the past ten years, asset management firms have experienced positive trends with market growth and new talent entering the industry at record rates. However, how has the pandemic, “great resignation,” inflation, and a potential recession impacted managers’ financial statements and audit considerations? Below we focus on the recent trends surrounding these unprecedented times.

• The Top Line: During 2022, many of our clients have seen a decrease or slowdown in revenue. Revenue is a significant portion of an audit and working with clients to ensure the auditor understands what to expect before the audit begins is pivotal. This process enables the auditor to perform efficiently without relying solely on prior years’ methods or approaches. This trend is likely to become even more relevant in 2023 as we may see a full year of lower top-line revenue.
• The Bottom Line: With a shrinking top line and significant cost increases for many services, bottom lines are taking a hit. This impacts bonus calculations, future planning, and many other areas of the business.
• Talent Retention and Attraction: We are seeing many clients struggle to find the balance between keeping employees financially happy (ADP recently cited up to a 17% wage growth amongst investment manager roles), as well as providing overall benefits that each generation and individual is craving.
• Talent Impact on Back-Offices: Accountants and specifically CPAs are increasingly difficult to attract and retain. This is impacting the ability to close the books in a timely manner, provide support to auditors and tax professionals, and is causing increased burnout in back-office employees. As you might imagine, this is impacting audit firms as well. Training and working with new personnel assigned to your audit or tax engagement can always be a headache, and this recent trend can increase the pain.
• Tax Changes Impacting Audits: On the tax side for asset managers, PPP loans, Employee Retention Credits, pass-through entity taxes, K-2/K-3, and state income tax apportionments are all a part of a seemingly never-ending list of changes. These recent trends for taxing authorities have also created complications for financial statements. Therefore, ensuring that your accounting, audit, and tax teams are connected is more vital than ever. Seeking answers throughout the year on how to properly account for these new transactions leads to greater efficiency and fewer surprises.

Asset managers understand the value of managing financial health through difficult periods. This allows for quality firms to prove their worth and is the best way to enable your firm’s success. Working with quality accounting and tax partners to ensure success throughout the year-end close and audit and tax season can reduce your stress during these uncertain times. If you need assistance, reach out to Wolf’s team today.