Increase in Audit Fees May Be On CPA Horizon

New York (June 28, 2002) -- Accounting scandals such as Enron and WorldCom are likely to prompt a major increase in audit fees, a noted malpractice attorney told CPAs at a conference on partner compensation.

Audit fees are likely to skyrocket for three main reasons, Dan Goldwasser, partner at New York-based Vedder Price Kaufman & Kammholz, told attendees Thursday at The Accounting Firm Partner Compensation Forum at New York's Roosevelt Hotel.

First, companies will be willing to pay more for reliable financial statements to restore public confidence, which in turn, affects their stock prices; second, a "fear factor" running through audit practices will prompt auditors to spend more time and effort on audits, which will drive up the cost of doing audits; and lastly, the higher cost of regulation as a result of fallout from scandals such as Enron and WorldCom will boost fees.

"All of those things will affect the way you compensate partners," Goldwasser noted. "You also may see some limitations on the non-audit services and some restrictions on various forms of incentive compensation."

And for CPA firms who think they won't be impacted by legislative changes to come because they don't audit public companies, think again, Richard Berkowitz, managing partner of Miami-based Berkowitz, Dick, Pollack & Brant, warned in a subsequent discussion. "Be actively involved with your state society, because your state boards are likely to try to mimic any [federal] legislation at the local level."

-- Melissa Klein

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