Public companies paid on average $7.1 million in audit fees, according to a new survey, representing an increase of 4.5 percent over last year’s audit fees paid.
The survey of nearly 400 senior executives, by Financial Executives Research Foundation, a research affiliate of Financial Executives International, and Audit Analytics, found the number of audit hours required for a public audit averaged 17,525, estimated to be an average of $249 per hour.
Public and private companies, as well as nonprofits, saw an overall increase in their audit fees in 2013 over the previous year, with public company fees being particularly affected by recent inspections by the Public Company Accounting Oversight Board.
Respondents indicated that the increase in their audit fees was primarily due to the review of manual controls resulting from PCAOB inspections, as well as other PCAOB issues. Researchers found that 63 percent of public companies whose audit firm was subject to the PCAOB’s oversight review indicated that their audit firm shared the comments they received from the PCAOB. In addition, 60 percent of these respondents were required to change their controls, while 80 percent changed their control documents as a result of the PCAOB requirements or inspection feedback.
In comparison, the total audit fees paid by privately held company respondents in 2013 averaged $174,858, which respondents indicated was 3.7 percent higher than last year. Private company respondents with less than $25 million in annual revenue experienced on average nearly a 12 percent increase in their audit fees from the previous year. The number of audit hours required for a private company averaged 2,927 hours, estimated to be $179 per hour.
Nonprofit organizations paid an average annual audit fee of $73,023 in 2013, representing an increase of 1.5 percent. The majority of private companies (60 percent) and nonprofit organizations (67 percent) attributed the increase to inflation.
“FERF’s annual Audit Fee Survey provides insight for benchmarking audit fees and experiences, and this year’s report shows that after ten years, companies on average are seeing increases in the fees paid to auditors,” said FEI president and CEO Marie Hollein in a statement. “Public companies in particular have seen an impact of the PCAOB inspections as a contributor to this year’s uptick.”
The survey also found that 57 percent of the public company executives who were polled indicated an increase in internal cost of compliance with Sarbanes-Oxley Section 404 within the past three years. However, many stated they believe they now have improved internal controls, making it worth the additional overall expense.
A 92 percent majority of public company respondents stated that their boards annually assess their audit firm’s performance and independence qualifications. Sixty-one percent of private companies and 65 percent of nonprofits indicated that their boards annually assess their audit firm’s performance and independence qualifications.
Public companies have used their audit firm for an average of 23 years, nearly three times the average auditor relationship reported by private companies and non-profit organizations (8 years). Ninety-one percent of public companies use the Big Four audit firms. Regardless of the length of service, responses received from public companies indicate they are all compliant with the five year lead partner rotation rules.
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