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.

“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.

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2 responses to “Audit Fees for Public Companies Up 4.5%”

  1. Only 28 audit firms provide audit services to 1,771 large accelerated filers. But the Global Six audit 97.6% of those companies. About 100 different firms audit accelerated and non-accelerated filers, with the Global Six commanding 77.4% and 70.2% of the market share, respectively. As you can see, the smaller the companies, the less the Big Four and Global Six dominate the market.
    Further, when we get down to Smaller Reporting Companies the market for audit services explodes. While only 28 firms served all 1,771 large accelerated filers, a whopping 420 different firms provide audit services to 3,324 smaller reporting companies, and the Global Six account for only about 10% of the Smaller Reporting Company market.Audit fees trends 2002 to 2015 has jumped from 48.95% to 79/19% but non-audit fee has decreased from 51.05% (2002) to 20.81% (2013).Meanwhil audit fees per Million in revenue has increased from $ 370(2002)to $ 479(2013)

  2. The passage of Sarbanes-Oxley in 2002 makes 2002 an excellent starting year from which to measure the extent to which audit firms intentionally bid below cost in order to garner the lucrative contracts based on percentage of easy to obtain savings initiatives unearthed by the audit.

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