Regulatory oversight and inflation have played significant roles in the rise in fees US companies paid in 2013 to external auditors, according to new research by Financial Executives International.
The 87 public companies participating in the survey reported an average rise in audit fees of 4.5% over the previous year, and paid an average of $7.1 million in audit fees. The 104 private company respondents said their audit fees increased an average of 3.7% over the previous year and reported spending an average of $174,858 for their audits.
The average change in audit fees for the 203 not-for-profits surveyed was an increase of 1.5%, with an average fee of $73,023.
Public company respondents said their increase in audit fees was primarily the result of the review of manual controls resulting from inspections mandated by the US Public Company Accounting Oversight Board (PCAOB), as well as other PCAOB issues.
The cost of complying with Section 404 of the US Sarbanes-Oxley Act of 2002 increased within the past three years for 57% of the public company respondents. Many said the additional expense was worthwhile because they believe their internal controls are better now.
“Public companies in particular have seen an impact of the PCAOB inspections as a contributor to this year’s uptick,” FEI President and CEO Marie Hollein said in a news release.
Most private company respondents (60%) and not-for-profit respondents (67%) attributed their rising audit costs to inflation.
Other survey findings include:
- Estimated per-hour audit fees were $249 for public companies, $179 for private companies, and $149 for not-for-profits.
- Nearly all public company respondents (92%) said their boards assess their audit firm’s performance and independence qualifications annually. Most private companies (61%) and not-for-profits (65%) said their boards assess their audit firm’s performance and independence qualifications each year.
- Public companies are most inclined to benchmark their audit fees against those paid by their peer companies. Nearly three-fourths (71%) of public companies conduct audit fee benchmarking.
—Ken Tysiac (email@example.com) is a CGMA Magazine editorial director.