An analysis of audit and non-audit fees shows audit fees paid by public companies crept upward in 2017 for the fifth straight year.
In the latest installment of its annual study of audit and non-audit fees, Audit Analytics says public companies paid an average of $548 in audit costs for every $1 million in revenue. That’s an increase of $8 per million over 2016 audit costs and $29 per million more than companies paid in 2015.
After a spike in audit costs with the advent of Sarbanes-Oxley reporting, audit costs hit their lowest point in 2012, when companies paid $450 per million in revenue for their external audit services. The number began creeping up again and continued climbing for the fifth consecutive year in 2017.
That’s relatively consistent with a separate analysis of audit costs performed by the Financial Education & Research Foundation, which said its survey indicates audit costs rose a median 2.5 percent in 2017 after a 1.3 percent increase the year before.
Companies participating in that survey attributed the increases largely to new accounting standards, like revenue recognition and leases, which are driving enormous changes in accounting processes and controls. Some companies also cited continued tension with respect to the audit of internal control over financial reporting, where inspections performed by the Public Company Accounting Oversight Board have driven significant increases in audit activity.
According to Audit Analytics, non-audit fees, or fees paid to the external auditor for services other than the external audit, also held steady for another year. For non-audit services, companies paid $137 per $1 million in revenue.
Typically, about 80 percent of the check written to the external audit firm is for audit fees while the other 20 percent is for additional services permitted under auditor independence rules. That ratio of audit and non-audit fees across public companies has been virtually constant for more than a decade.