AUDIT FEES ON THE RISE
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Morristown, N.J. -- Public companies saw a 5 percent increase in the fees they paid to external auditors last year, while private companies reported a 7 percent rise, according to a new survey from Financial Executives International.
The average audit fees of companies with centralized operations were significantly less than those with decentralized operations, for both public and privately held companies. Public companies reported paying an average of $3.9 million in total audit fees for fiscal year 2011, an increase of 5 percent from the audit fees that the same respondents paid for their prior fiscal year audit.
Overall, executives cited internal audit staff work and increased work by other finance staff as the primary reasons for the difference in fees. The survey also found that 82 percent of public companies reported that they used one of the Big Four accounting firms as their primary auditor, with Deloitte mentioned most often.
Furthermore, private company respondents reported an average of $231,200 in 2011, a 7 percent increase from the prior year. For companies with annual sales ranging from $1 billion to $4.9 billion, the average audit fees paid were $779,500, an increase of 3 percent more than the audit fees they paid in 2010.
Private companies cited increased internal audit staff work and inflation as the primary reasons for changes in fees. Only 33 percent of the respondents from private companies reported that they used one of the Big Four accounting firms as their primary auditor, with PricewaterhouseCoopers mentioned most often.
Despite the fee hike, the 270 financial executives who responded to the survey continue to rate their auditor relationships favorably. Both public and private companies rated their auditors "neutral-to-good" across eight different criteria. Once again, auditor tenure appeared somewhat proportional to the size of the company by annual revenues. The weighted average number of years based on all public company respondents was 20 years, while auditor relationships with private companies averaged less than half of that, at eight years.