Why publicly traded companies are required (from government) to pay for the auditor fees?
The audit is done for the benefit of the shareholders to ensure that the company is providing a legitimate picture of its financial condition.
They don't HAVE to. They want to because it gives the investment community more confidence in their numbers.
"...assuming that investors believe the management team would not fake the financials..." Guess you've never heard about Enron or WorldCom? Two major cases of fraud that led to Congress passing the Sarbanes-Oxley act? Why would the government pay for an annual audit? A corporation decides on it's own that it wants to be publicly traded, have investors or borrow from a bank. Those are the main stakeholders that would require an audit. A company that only uses the owners investment and reinvested funds technically does not require to be have an audit completed.