Audit fees paid by public companies increased a median 3.4 percent in 2014 from the prior year, and companies with internal control problems saw the biggest increases, according to the latest survey data.
The study by Financial Executives Research Foundation says 20.6 percent of public companies 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. Public companies that responded to a FERF survey cited two primary reasons for their increase in audit fees -- acquisitions and the review of manual controls by auditors as a result of inspections by the Public Company Accounting Oversight Board.
FERF said it looked at audit fees across more than 7,000 public companies, where it found the median increase of 3.4 percent. As a result of its survey of 220 financial executives, FERF found a median increase of 3.1 percent in audit fees. Those figures correlate closely with earlier data from Audit Analytics that showed the cost of a public company audit for 2,300 accelerated filers rose 3.55 percent from 2013 to 2014.
According to FERF’s survey, 57 percent of public companies whose audit firm faced a PCAOB inspection said their audit firm shared the comments they received from the PCAOB. Nearly half of public companies said their auditors pushed for changes in controls as a result of PCAOB requirements or findings. None of the companies indicated, however, that they were forced to restate as a result of a PCAOB inspection.
The survey also revealed more than half of public companies reported their internal costs have increased over the last three years to comply with Sarbanes-Oxley internal control reporting requirements. Almost half also reported they have seen an improvement in their internal controls and were satisfied with the additional costs they incurred to bring about those improvements.
The majority of public companies also indicated that the volume of work performed by external auditors in 2014 increased over 2013, both on the financial statements and internal controls. “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 FERF.