The ratio of audit fees over revenue was the lowest last year since 2004, according to a report by the research firm Audit Analytics, making it the lowest since the implementation of Section 404 of the Sarbanes-Oxley Act of 2002. 

For the report, Audit Analytics studied the audit and non-audit fees paid by accelerated filers since 2002. Audit Analytics found that in 2002, non-audit fees represented 51 percent of the total fees paid by the research population of accelerated filers studied in the report, but after three years of steady decline non-audit fees appear to have leveled off at about 21 percent of total fees. To some extent, the drop in non-audit fees as compared to audit fees is attributable to the Auditor Independence Rules adopted by the SEC in 2001, the report noted, which precluded the principal independent accountant from performing certain non-audit services to ensure auditor independence when performing the independent audit.

In 2002, the cost of non-audit fees paid by the companies studied in the report for every million dollars in revenue was $387. After four years of substantial declines, the research population paid only $146 of non-audit fees for every million dollars in revenue during 2006. Thereafter, for the next six years, the value leveled off somewhat with an overall gradual decline. The 2012 figure was the second lowest value calculated for the 11 years under review: $134 for every million dollars in revenue.

The ratio of audit fees over revenue peaked in 2004 and 2005, when, for both years, the average amount of audit fees paid per $1 million of revenue was $592. After three consecutive years of decline the figure increased slightly in 2009, but the uptick is due to a decrease in revenues, instead of an increase in fees. After another three years of decline, 2012 saw the lowest value since 2004 (since the implementation of SOX 404): $472 of audit fees for every million dollars in revenue.  The fees declined despite the extra work demanded of the auditors during the same period when more and more companies were required to obtain auditor attestations pursuant to SOX 404(b).

“Because SOX 404 requirements applied to different categories of accelerated filers at different dates, the number of companies that needed to file an auditor attestation increased from year to year,” said the report. “In 2004, out of a total of the 2,408 companies, 1,476 filed auditor attestations. This number increased by 554 companies in 2005 to a total of 2,030 auditor attestation filers. In 2006, the number increased by 179 companies to a total of 2209. An increase of 102 created a population of 2311, a population mantained in 2008 and followed by a slight decrease in 2009. Three years of increases from 2010 to 2012 brought the total to 2,403. Therefore, in 2012 all but 5 of the 2,408 companies filed an auditor attestation.”

The report found that audit fees tended to decrease while the number of auditor attestation filings increased. Therefore, the average audit fee for the population of companies researched in the report tended to decrease during a period of increased workload for auditors.

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