Public company audit fees inched upward again in 2016, based on the latest data available from Audit Analytics.
In the latest installment of its annual study of audit and non-audit fees, Audit Analytics says public companies paid an average of $541 per million dollars of revenue for their mandatory financial statement audit, plus the audit of internal control over financial reporting, where it is required. That’s an increase of about 3.4 percent over the $523 per million in revenue that public companies paid in 2015.
When combining and audit fees with non-audit fees paid to the principal audit firm, the report says companies paid $611 per million in revenue in 2016 compared with $593 per million in 2015.
It’s the fourth consecutive year of increase in audit fees as they relate to revenue, although a smaller increase than the year before, according to the report. Companies paid an average of 10 percent more in audit fees as a percentage of revenue in 2015, the biggest increase since Sarbanes-Oxley caused a spike in audit costs in 2004. Fees as a factor of revenue also rose 2.3 percent in 2014 and 3 percent in 2013 after falling for three years from 2010 to 2012.
Those audit cost increases correlate with the time period when the Public Company Accounting Oversight Board began coming down hard on audit firms in regulatory inspections. Across especially the largest audit firms, deficiency findings in audit inspections spiked in 2010 and have persisted ever since.
The Audit Analytics report also examines audit fees compared with non-audit fees paid to the same firm, to get a sense of audit firms’ compliance with auditor independence rules that prohibit auditors from performing certain non-audit services for their public company clients. The report shows a slightly larger spread in audit vs. non-audit fees in 2016 compared with 2015.
Of the $10.26 billion paid in audit and non-audit fees paid to audit firms by public companies in 2016, 79 percent went to the principal audit firm for the required audit work and 21 percent went to the same firm for non-audit services. In 2015, it was closer to 78 percent for audit fees and 22 percent for non-audit fees, for an increase in the spread by roughly 2 percentage points.