Public companies saw a 5 percent increase in the fees they pay 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 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 their 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.

“As we approach a milestone anniversary of the Sarbanes-Oxley Act, public and private companies are continuing to demonstrate overall control with the external audit process,” said FEI president and CEO Marie Hollein in a statement. “Given the current state of businesses, risk management will remain an area of focus for finance professionals. Furthermore, a major point of differentiation among companies continues to be the contrast between companies with centralized operations and decentralized operations, as audit fees for those with centralized operations continue to be significantly lower.  Companies will certainly continue to look for cost efficiencies, and it will be interesting to observe the changes to their process in the next year.”

Despite the fee hike, the 270 financial executives who responded to the survey continue to rate their auditor relationships favourably. 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.

When asked about their support of a mandatory auditor rotation, an overwhelming majority of both public company respondents (95 percent) and private company respondents (85 percent) do not support it. The Public Company Accounting Oversight Board plans to hold a public roundtable meeting in San Francisco on Thursday to hear feedback from accounting firm leaders, financial executives, former SEC official, investor representatives, academics and others about the proposal to require companies to change auditing firms after a fixed number of years.

Public companies responding to the survey were, on average, larger than private companies in terms of annual sales revenues. A large majority of the large accelerated filers (81 percent) list their shares on NYSE Euronext, while most of the smaller publicly traded companies list their shares on the Nasdaq.

For the second year, companies were also asked about their preparations for a formal risk management process. Among public companies, 73 percent of the respondents from large accelerated filing companies said that their company did have a risk management process in place and that it had been rolled out to the entire company. However, 40 percent of the non-accelerated filers responded this way.

In addition, over half (55 percent) of the accelerated filers said that their company had a risk management process that was only used by the company headquarters. Of those companies that do have a risk management process in place, a clear majority of each responding group indicated that it resides with management, rather than with internal audit or the audit committee of the board of directors. In contrast, the majority of respondents from private companies (63 percent) did not have a risk management process in place, a slight increase from last year.