A new survey on audit fees presents CFOs with a glass-half-full/empty test. On the plus side, fees in 2008 increased only 2.2% to 3.7%, a rate that falls below most measures of inflation and is a far cry from the substantial annual hikes of a few years ago.
But muddying that rosy view is the fact that the small increase is due in part to companies absorbing more auditing work internally. That’s according to Marie Hollein, CEO of Financial Executives International, whose affiliate, the Financial Executives Research Foundation, performed the study.
The foundation surveyed more than 350 public and private companies and found that audit fees for publicly traded firms rose an average of 2.2% in 2008 from the previous year, while private companies paid 3.7% more.
Half of private companies predict their fees will rise again this year (by 2% to 10%), while a strong majority (81%) of public companies expect fees to hold steady or decrease. In 2008, public companies paid, on average, $216 an hour for audit services, while private companies paid $179.
Although they were more apt to cite service concerns than fee increases, private companies also differed from their public counterparts in another way: nearly one in four have put their contract out for competitive bid, and 6% say they plan to switch auditing firms. Fewer than 2% of public companies anticipate changing auditors.
Public companies, in fact, have been with their current auditors for an average of 16 years, compared to 8 years for private companies. Fully 86% of the public companies responding to the survey use a Big 4 firm, while only 38% of private companies responding do so.
In a statement, Hollein suggested that the modest uptick in auditing fees signals that public companies have gotten their arms around the requirements of the Sarbanes-Oxley Act and have made substantial progress in streamlining the auditing process, while private companies lag on this learning curve.
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