According to the Financial Executives Research Foundation (FERF), the research affiliate of Financial Executives International, audit fees rose in 2013 for public companies, private companies, and non-profit organizations. In its October 2 press release announcing the results of the annual Audit Fee Survey, FERF said that public company audit fees “were being particularly impacted by recent Public Company Accounting Oversight Board (PCAOB) inspections.” FERF conducted the survey, which included “nearly 400” respondents, in partnership with Audit Analytics.
According to the press release, the 2013 survey findings included the following –
Public companies paid on average $7.1 million in audit fees, an increase of 4.5 percent over 2012. The average number of audit hours required for the public companies represented by survey respondents was 17,525.
Public company respondents indicated that the increase in their audit fee was primarily due to the review of “manual controls” resulting from PCAOB inspections or other PCAOB issues. 60 percent of respondents stated that they were required to change their controls, and 80 percent changed their control documents, as a result of “PCAOB requirements” or PCAOB inspection feedback.
Total audit fees paid by privately-held company respondents in 2013 averaged $174,858, 3.7 percent higher than in 2012. Non-profit organizations paid an average annual audit fee of $73,023 in 2013, representing an increase of 1.5 percent. The majority of private companies and non-profit organizations attributed the increase in their audit fees to inflation.
More than half of public company respondents (57%) stated that their company had experienced an increase in internal cost of compliance with the requirements in Section 404 of the Sarbanes-Oxley Act during the past three years. (Section 404 requires management to assess and report on internal control effectiveness and, for larger companies, requires an ICFR audit.) However, “many stated they believe they now have improved internal controls, making it worth the additional overall expense.”
Comment: These survey results show the continuation of a trend identified in the prior year. As discussed in the August 2013 Update, the 2012 FEI Audit Committee Survey found that public company audit fees rose 4 percent in 2012, as compared to 2011. Respondents in the 2012 survey, like those in 2013, blamed the PCAOB for the increase.