Many practitioners have told me that the fees for audits are up. It is probably because of a number of reasons. In the case of the Big Four, it can be attributed to the spinoff of their consulting units. Their audit practices can no longer be used as loss leaders to help sell higher-priced consulting services. Rather, they must once again be structured as profit centers.

Sarbanes-Oxley is also having its impact on firms. Audits are much more complicated as auditors must review if a company is in compliance with Sarbanes-Oxley.

Then there is SAS 99, which requires the auditor to focus more on the detection of fraud. The standard mandates an educated investigative eye along with the existing compliance mindset. In addition to more steps to audits, senior staff will now be required to be actively involved, as lower-level staff will probably not have the business acumen to notice when something might be awry.

In general, auditors will be very careful documenting their actions and I would expect them to conduct a lot more sample testing and drilling down looking for fraud.
I think the fee increases are fine. Over the last few years, I have repeatedly heard auditing and tax work referred to as a commodity. The disturbing aspect was that some of the most vocal holding this view were those within the profession. They saw no future for traditional work by CPAs and would only talk about consulting work and the need for value pricing concerning those services.

The marketplace has largely silenced those at least with regard to auditing services. The public wants to be assured that accountants understand what is viewed as the essence of their job. The days of boilerplate language by itself selling for low-ball prices are over. Good riddance!

Value pricing has arrived for audits. I predict the same will occur with regard to tax preparation and planning. I think the outsourcing of tax return preparation is an indication that I might be right. When you sense what can go wrong, it becomes not if, but rather when. And as with auditing, I expect marketplace conditions will control resulting in higher fees for tax work.

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