Something to Consider January 2020 2
Annual audit fees continue to rise as companies have to respond to audit and accounting rules changes. The average fees public companies pay to external auditors have climbed 31% over the past decade and this doesn’t look set to slow down any time soon.
Amongst other changes, a recent new PCAOB rule requires independent auditors to spend time assessing and disclosing the most challenging elements found in the financial audit, which, in itself will result in increased effort, analysis and justification.
The 10th Annual Audit Fee Survey report from the Financial Education & Research Foundation (FERF) found reasons for fee increases for public companies are in line with the impact of new standards from the FASB at 66%, particularly those related to revenue and leases. Other contributing factors include high levels of mergers and acquisition activity at 36% and a focus on revenue recognition at 34%. The private sector and non-profits cited inflation and negotiation with the primary auditor as primary reasons. The largest change to audit fee averages by industry was cited by Depository Institutions – 22.94% due to preparation for credit losses CECL adoption.
You can read the Wall Street Journal summary here