FEI Survey: Companies Report Signs of Stabilization With 2009 Auditing Process

- Relationship between External Auditor and Company Remains Strong -

- Companies Satisfied With Auditor Performance -

Jun 24, 2010, 08:00 ET from Financial Executives International (FEI)

MORRISTOWN, N.J., June 24 /PRNewswire/ -- A newly-released report from Financial Executives Research Foundation (FERF), the research affiliate of Financial Executives International, revealed optimistic trends in the 2009 auditing process, suggesting that companies are well-adjusted to the financial reporting involved with Sarbanes Oxley.  Companies surveyed indicated a leveling in their average audit fees, and expressed overall contentment in their relationships with their external auditors.

The Audit Fee Survey, which is conducted annually by FERF, polled nearly 350 executives, representing both U.S. publicly held companies (of which 85% were accelerated filers with total market capitalizations of more than $75 million), privately held companies and foreign companies, to examine the total fees companies paid to external auditors in 2009 and their overall satisfaction with their audit firms. The survey, formerly focused on SOX 404 compliance costs, was updated in recent years to reflect the shift in auditors no longer segregating fees for the internal control auditor attestation from the traditional statutory financial statement audit fees(1).

This year's survey took a closer look at companies' perceptions of their external auditors and the overall auditor relationship. Respondents expressed satisfaction with their current auditor, and very few revealed intentions to change them – only 11 percent of private companies and five percent of public companies plan to make a switch.  On average, both public and private companies also gave their auditors positive marks across the board, rating them with scores ranging from 3.6 to 4.3 (based on scale of one to five, with five being 'very good') in areas that included communication, technical skills, knowledge of their business, status reporting, audit administration, global coordination and audit efficiency. Public companies also reported an average 16-year relationship with their current auditor.

Respondents experienced stabilization in their external audit fees in 2009(2). Publicly held companies surveyed this year paid on average $4.8 million in total audit fees for fiscal year 2009. While the average was skewed slightly higher this year due to representation from more companies with revenues of $25 billion or more, public company respondents reported that their own organization's audit fees decreased from the prior year.  Similarly, this year's private company respondents reported an average of $291,200 in 2009 audit fees, stating that the amount was almost identical to the fees they paid in the prior year. In terms of man hours, public company audits averaged approximately 21,458 hours in 2009, while private companies averaged about 2,606 hours.

"Companies by and large this year are expressing relative ease in the audit process, which is a positive sign," said FEI President and CEO Marie Hollein.  "We have seen past respondents predict that the fees would stabilize, and the new pool of companies surveyed are showing that this is beginning to happen for them.  Companies were also generally satisfied with the job of their auditors in 2009 and are maintaining longer and stronger relationships with their firm.  We believe this is crucial - as the internal finance staffs continue to take on new responsibilities."  

Scott Cutler, Executive Vice President Global Corporate Client Group at NYSE Euronext, the survey's sponsor, noted: "It is encouraging to see the ongoing stabilization and more importantly satisfaction in the company/auditor relationship."

Other key findings from the survey include:

  • For public companies, the hourly audit fee rate per hour averaged $218 ($186 for non-accelerated filers and $220 for the large accelerated filers). Interestingly, the lowest hourly rate ($110) and the highest hourly rate ($400) were both reported by large accelerated filers.  For private companies, the hourly audit fee rate per hour averaged $185 ($159 for the smallest companies to $243 for companies with annual revenues of $1 billion to $4.9 billion.)

  • Average audit fees of companies with centralized operations were significantly less than those with decentralized operations, for both public and privately-held companies. In particular, public companies with centralized operations paid $1.9 million for their annual financial statement audits, while those with decentralized operations paid $7.7 million in 2009.  

  • An overwhelming majority of public company respondents (88%) used one of the "Big 4" audit firms, compared with about a third (36%) of private company respondents.

  • Public companies responding to the survey were, on average, larger than the private companies responding in terms of annual sales revenues.  They were also comprised of more legal entities (68) than the private companies responding (11).

  • Most large accelerated filers list their shares on the NYSE Euronext Stock Exchange, while most of the smaller publicly-held companies list their shares on NASDAQ.

Additional findings include an analysis of the overall audit experience for companies. Detailed figures for audit fees are available online through AuditFeeCheck, FEI's online search tool. Responses can be searched based on all criteria, including title, company type and company size. AuditFeeCheck is available on the FEI website.

Results are free for FEI members, and nonmembers can purchase the survey results for $129, by visiting the FERF bookstore online at www.ferf.org/bookstore.

(1) As outlined in the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 5.  

(2) The averages reported in this year's Audit Fee Survey are not comparable to those reported in the 2009 Audit Fee Survey, as the companies included this year's respondent sample are different than those in last year's respondent sample .

About Financial Executives International (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 85 chapters, 74 in the U.S. and 11 in Canada. FEI is headquartered in Florham Park, NJ, with additional offices in Washington, DC, and Toronto. Visit www.financialexecutives.org for more information.

Financial Executives Research Foundation, Inc. (FERF) is the non-profit 501(c)3 research affiliate of Financial Executives International (FEI). FERF researchers identify key financial issues and develop impartial, timely research reports for FEI members and nonmembers alike, in a variety of publication formats. The Foundation relies primarily on voluntary tax-deductible contributions from corporations and individuals.

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