Public companies paid an average of $1.5 million in audit fees last year, according to a new report, with a median audit fee of $402,812, representing a median increase of 3.4 percent over the audit fees they paid in 2013.

The report, from the Financial Executives Research Foundation, a research affiliate of Financial Executives International, examined the total fees that companies paid to external auditors in 2014 and several additional services related to the auditing process, based on responses from 220 financial executives. The report also examines audit fees as reported by the larger pool of SEC filers of more than 7,000 organizations.

The analysis found a total of 20.6 percent of SEC filers reported ineffective internal controls over financial reporting. The median increase in audit fees for SEC filers that reported ineffective internal controls over financial reporting were 3.0 percentage points higher than the median for all SEC filers, and 4.6 percentage points higher than the U.S. average producer price index for services.

Public companies responding to the survey experienced a median increase of 3.1 percent, compared to a 3.4 percent increase experienced by the pool of SEC filers. Public company survey respondents also indicated that the increase in their audit fees was primarily due to acquisitions and the review of manual controls resulting from PCAOB inspections.

Fifty-seven percent of public companies responding to the survey whose audit firms were subjected to the Public Company Accounting Oversight Board’s oversight review indicated that their audit firm shared the comments they received from the PCAOB. In addition, 45.3 percent of the respondents were required to change their controls as a result of PCAOB requirements or findings. However, none of the survey respondents indicated that the PCAOB inspections resulted in a restatement of financial statements.

“Audit fees are an important metric for members and our detailed analysis reveals critical information they can use in controlling costs,” said Andrej Suskavcevic, president and CEO of Financial Executives International and Financial Executives Research Foundation, in a statement. “FERF is dedicated to providing this type of thoughtful and thorough research that offers a unique perspective for financial executives.”

Private companies surveyed paid an average of $254,740 total audit fees in 2014, with a median of $70,000. This represents an average increase of 2.7 percent over the prior year, with the median increase at 2.0 percent. Private company respondents with less than $5 million in annual revenue experienced an average audit fee increase of nearly 11.2 percent over the prior year, with a median increase of 6.7 percent. The number of audit hours required for a private company averaged 2,800 hours, with a median of 850.

Nonprofit organizations paid an average annual audit fee of $107,208 in 2014, representing an average increase of 1.3 percent, while the median of $36,440 in 2014 remained flat. The majority of private companies (60%) and non-profit organizations (65%) attributed the increase to inflation.

A majority of public companies indicated that the volume of annual audit work by external auditors in 2014 has increased compared to 2013, in order to obtain both an auditor’s report on the financial statements (69.3 percent) and an auditor’s report on internal controls (63.2 percent).

Over half of respondents, or 58.7 percent, indicated an increase in the internal cost of compliance with Sarbanes-Oxley Section 404 within the past three years. However, almost half (or 45.3 percent) saw an improvement to their internal controls and were satisfied with the additional expense.

For a copy of the report, visit www.ferf.org/reports.