Public companies reported an average 4.5-percent increase in fees they paid to auditors in 2013 over the year before, based on the annual survey by Financial Executives Research Foundation, with the average audit bill sitting at $7.1 million.
Companies said they paid more for audit work primarily because the Public Company Accounting Oversight Board has come down on auditors for various audit deficiencies in recent years. Companies said manual controls have been subject to greater review, and auditors are generally doing more testing and documentation as a result of increased PCAOB scrutiny. In addition, more than half of public companies said their internal cost of compliance with Sarbanes-Oxley has increased in the past few years. They also cited inflation, an acquisition, or other changes in company structure or operations as cause for audit cost increases.
The survey captured data from 87 public companies, 79 of those accelerated filers with a public float of more than $75 million, and 60 of them reporting revenues of $1 billion or more. The survey says the number of hours required for a public company audit averaged 17,525, which puts the average cost per hour at $249. Private companies, by comparison, paid 3.7 percent more for their audit work, while nonprofits reported an average audit cost increase of 1.5 percent.
While the average audit bill for public companies in the survey rose 4.5 percent, the spread among the survey population spanned nearly 22 percentage points. Companies with annual revenues between $100 million and $500 million, for example, reported an average increase in their audit fees of 14.6 percent, while companies with less than $25 million in revenue said they saw a reduction of 7.3 percent in their audit costs. Companies with revenues between $1 billion and $5 billion said they paid 7.7 percent more for their audits, but the biggest companies with revenues greater than $50 billion said they paid 1.4 percent less for their audits in 2013.
The annual survey is meant to help companies benchmark their audit fees, said Marie Hollein, president and CEO of FERF and Financial Executives International, in a statement. “This year’s report shows that after ten years, companies on average are seeing increases in the fees paid to auditors,” she said. "Public companies in particular have seen an impact of the PCAOB inspections as a contributor to this year’s uptick."
The survey also found 92 percent of public companies said their board of directors assesses audit firm performance and independence annually, and they’ve stayed with the same audit firm for an average of 23 years, nearly three times the tenure for private or non-profit companies.