Accounting & Auditing Update

Half of the largest public companies saw SOX-related audit costs rise in 2017, driven by regulatory pressure, M&A activity, and new accounting rules.

New academic research suggests there is indeed a correlation between pressure on audit fees and audit quality — and it’s not pretty.

Public company audit fees inched upward again in 2016, based on the latest data available from Audit Analytics.

Companies are mitigating increases in audit fees, and in some cases are even reducing audit costs, using some key tactics outlined in a new report. More from Tammy Whitehouse.

Tammy Whitehouse has the results of a new study that shows audit cost increases for public companies are outpacing inflation, but the largest companies are taking measures to keep cost increases in check.

A recent study from Financial Executives International of 7,000 public companies revealed that 20.6 percent reported ineffective internal controls over financial reporting, and the median audit fee increase for those companies was 3 percentage points higher than for public companies as a whole. The companies cited two primary reasons for the fee increase: acquisitions, and the auditor review of manual controls as a result of PCAOB inspections. Details inside.

According to a recent Audit Analytics study of fees paid in 2014 by 2,300 accelerated filers, 80.3 percent were focused on the integrated financial statement internal control audit; fees for non-audit services dipped to 19.7 percent of the total bill from the audit firm, a drop from 20 percent during the past several years. Before Sarbanes-Oxley, audit and non-audit services split almost exactly 50-50, suggesting the regulator crackdown on auditor independence violations is driving a significant gap between what companies pay for the financial statement audit compared with other non-audit services. Details inside.