Audit fees for public companies rose 3.4% last year, reflecting in part the impact of completed mergers or acquisitions, according to a new survey by the trade group Financial Executives International.
More than 7,000 SEC filers paid external auditors an average of $1.5 million in 2014, with a median audit fee of $402,812, FEI said in its annual Audit Fee Survey, noting that the increase was also fueled by reviews of manual controls resulting from Public Company Accounting Oversight Board inspections.
Most respondents indicated that to obtain an auditor’s report on the financial statements, as well as an auditor’s report on internal controls, the volume of annual audit work increased in 2014 compared with 2013.
PCAOB inspections mostly resulted in a change of controls or control documentation, the survey said, but no respondent indicated that the inspections resulted in a restatement.
In addition, 58.7% of public companies indicated an increase in internal cost of compliance with Section 404 of the Sarbanes-Oxley Act within the past three years. However, 45.3% of respondents stated they believe they now have improved internal controls, making it worth the additional overall expense.
Section 404 requires a publicly-held company’s auditor to attest to, and report on, management’s assessment of its internal controls and procedures for financial reporting.
In the private sector, companies surveyed paid an average of $254,740 in total audit fees in 2014, up 2.7% over the prior year. Median fees were $70,000, up 2.0%. The number of audit hours required for a private company averaged 2,800 hours, with a median of 850.
More than 45% of public companies reported lower audit fees from the prior year, but in each of the past three years, approximately 12% of public companies have reported increases of 50% or more, the FEI said.