FEI Audit Fee Survey: Public/Private Company Audit Fees Continue to Rise

Jul 30, 2013, 13:45 ET from Financial Executives International

MORRISTOWN, N.J., July 30, 2013 /PRNewswire/ -- Financial Executives International (FEI), the association of choice for CFOs and other senior-level financial executives, today released the findings from its annual Audit Fee Survey.   While companies on average this year experienced only minor increases in audit fees from the previous reporting year, they continue to face a number of challenges beyond costs.  Public companies remain focused on mitigating financial risk, while private companies are beginning to feel the influence of public company standards.

The FEI Audit Fee Survey, which is conducted annually by Financial Executives Research Foundation (FERF), the research affiliate of FEI, polled more than 220 financial executives, representing U.S. publicly-held companies (of which 91 percent were accelerated filers with total market capitalizations of more than $75 million), privately-held companies and non-profit organizations to examine the total fees companies paid to external auditors in 2012, and a number of issues related to the auditing process. The survey originated in 2002 to track compliance costs relating to Section 404 of the Sarbanes-Oxley Act, which at the time was the most sweeping financial regulation since the Securities Act of 1934.

In 2012, audit fees paid by publicly-held companies responding to the survey averaged $4.5 million, representing a four percent increase over their prior fiscal year audit. The number of audit hours required for the responding public companies averaged 16,737. Reasons attributed to the increase of audit hours include acquisitions and the perception that Public Company Accounting Oversight Board (PCAOB) inspections of audit firms have led to an increase in audit work, according to the survey.

In comparison, the total audit fees paid by privately-held company respondents in 2012 averaged $147,800, an increase of three percent over their prior fiscal year audit. The number of audit hours required for private companies averaged 1,769. Privately-held companies attributed acquisitions (39 percent) and inflation (30 percent) as their reasons for the change in audit fees.  

Similar to previous years, the average audit fees of companies with centralized operations were found to be significantly less than those with decentralized operations, for both public and privately-held companies. On average, public companies with centralized operations paid $3.7 million for their annual financial statement audits, while those with decentralized operations paid $4.6 million. Private companies with centralized operations on average paid $103,500 for their annual financial statement audits, and privately-held companies with decentralized operations paid $354,600.

"We continue to believe that the audit of the financial statements of a company with centralized operations is more efficient than that of a company with decentralized operations, and this year's survey results demonstrate that this still holds true," said Marie Hollein, President and CEO of Financial Executives International and Financial Executives Research Foundation. "The survey results indicate the importance of FEI's role in monitoring and responding to standard setting developments with regard to any potential impact on our members and their companies."

Other key findings from the survey include:

  • In terms of auditing firms, a greater percentage of public company respondents (87 percent) continue to use Big 4 audit firms than did either private company respondents (29 percent) or non-profit organizations (38 percent).
  • Privately-held company respondents believe public company standards have influenced their private company audit. When asked about the extent they believe public company standards have influenced their audit, nearly all respondents expressed some degree of influence, with more than a quarter (29 percent) stating that they were significantly influenced.
  • When public companies were asked about their Section 404 compliance costs over the past three years, 39 percent of accelerated filers and 27 percent of large accelerated filers reported that their compliance costs had increased.

Survey results are free for FEI members, and nonmembers can purchase the survey results for $249 by visiting the FERF bookstore online at www.ferf.org/bookstore. Detailed figures for audit fees will become available online through AuditFeeCheck, FEI's search tool. Responses can be searched based on all criteria, including industry, company type and company size. AuditFeeCheck is available on the FEI website.

About FEI
Financial Executives International is the leading advocate for the views of corporate financial management. Its 15,000 members hold policy-making positions as chief financial officers, treasurers and controllers at companies from every major industry. FEI enhances member professional development through peer networking, career management services, conferences, teleconferences and publications. Members participate in the activities of 86 chapters, 74 in the U.S., 11 in Canada and 1 in Japan. FEI is headquartered in Morristown, NJ, with additional offices in Washington, D.C. and Toronto.  Visit www.financialexecutives.org for more information.

SOURCE Financial Executives International