Audit Fees for Public Companies Up 4.5%

The impact of PCAOB inspections contributed to the rising cost of public-company audits, finds an FEI study.
Matthew HellerOctober 6, 2014
Audit Fees for Public Companies Up 4.5%

Audit fees for public companies rose 4.5% last year, reflecting the impact of recent Public Company Accounting Oversight Board inspections, according to a new survey by the trade group Financial Executives International.

The 87 public companies that participated in FEI’s annual Audit Fee Survey for 2014 reported paying an average of $7.1 million in audit fees, with the number of audit hours required for a public audit averaging 17,525.

According to the FEI, respondents indicated that the increase in audit fees was primarily due to the review of manual controls resulting from PCAOB inspections, as well as other PCAOB issues. Sixty-three percent of public companies whose audit firm was subject to the PCAOB’s oversight review indicated that their audit firm shared the comments they received from the PCAOB. In addition, 60% percent of these respondents were required to change their controls, and 80% changed their control documents as a result of the PCAOB requirements or inspection feedback.

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“Public companies in particular have seen an impact of the PCAOB inspections as a contributor to this year’s uptick” in audit fees, Marie Hollein, chief executive of FEI, said in a news release.

In addition, 57% 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, many 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.

For the 104 private companies represented in the survey, the average increase in audit fees was 3.7%, with audit spending averaging $174,858. Non-profits experienced an increase of 1.5%, with an average fee of $73,023.

Most private company and non-profit respondents attributed their rising audit costs to inflation.