External audit fees are finally beginning to moderate and in some cases decline for big companies for the first time since the Sarbanes-Oxley Act went into effect in 2004.
A study by Compliance Week of the audit fees paid in 2007 by S&P 500 companies with more than $1 billion in annual revenue found only a 3.2 percent median increase over their audit costs in 2006. That compared to a 4.4 percent increase from 2005 to 2006. When audit fees at a handful of 2007 companies with extraordinary transactions were eliminated from the calculations, the average audit fee in 2007 actually fell by 0.3 percent. The study credited the approval of Auditing Standard No. 5 for making audits more cost effective.
The study noted that there was only a 2.7 percent increase in 2006, but said the change during that year included a sharp drop in tax fees and a higher spike in audit fees. During fiscal 2007, the results show almost no change in tax fees, audit-related fees, or other fees, so the increase was almost entirely due to audit fees specifically.
The median total auditor costs for companies was $6.9 million in 2007, compared to $6.7 million in 2006 and $6.3 million in 2005. Median costs for audit fees specifically in 2007 were $5.6 million.
In some cases, the audit fee difference was dramatic. Morgan Stanley, which was audited by Deloitte & Touche, paid $7.4 million in audit fees in 2007, compared to $37.3 million in 2006, a decline of over 80 percent. SunTrust Banks, audited by PricewaterhouseCoopers, paid $408,000 in audit fees in 2007, compared to $3.87 million in 2006, an 89.5 percent difference.
