Total external audit fees paid by companies rose in 2011, according to a poll of more than 270 executives.
Private companies reported a 7% increase, and publicly held companies reported a 5% increase in external audit fees paid, according to the 2012 Audit Fee Survey, which was conducted by the research arm of Financial Executives International (FEI). Representatives of 138 US private companies, 111 US publicly held companies, 24 nonprofit organisations and four companies based outside the United States were included in the survey.
Private company respondents overall reported average audit fees of $231,200 for fiscal year 2011, according to a news release about the survey. Private companies with annual sales of $1 billion to $4.9 billion paid an average of $779,500 in audit fees. Those companies reported that their audit fees rose 3% over the previous year.
Public companies surveyed paid an average of $3.9 million in total audit fees in fiscal year 2011. Eight-six per cent of the public companies involved in the survey were accelerated filers with total market capitalisations of more than $75 million.
The 2011 numbers bucked the trend of recent years. In 2010, 2009 and 2008, public company executives in this survey reported their fees compared with the previous year either increased less than 4% or decreased. Private company fees were reported as “essentially the same” in 2010 as in the previous year; “almost identical” in 2009 compared with the previous year; and 3.7% higher in 2008 than in 2007.
Private company officials cited inflation as one reason for the changes in fees. Other frequently cited reasons included acquisitions and other changes in company operations—issues that could increase the complexity of work done by external auditors. The report speculates that fees would have risen even more if internal staff members had not increased their work with regard to the audit.
Private and public executives rated their auditors as “neutral to good” across all eight criteria measured in the survey. Ninety-five per cent of public company respondents and 85% of private company officials surveyed did not support mandatory audit firm rotation, which is a focus of a current PCAOB analysis on enhancing auditor independence, objectivity and professional scepticism.
—Ken Tysiac (email@example.com) is a CGMA Magazine senior editor.