Small reporting companies constitute less than 3% of the total market capitalization of U.S. public companies but pay a higher percentage of revenue in audit fees than large and accelerated filers, according to Audit Analytics.

Of 3,324 smaller public companies identified by the research firm, 3,145 disclosed a total of more than $332 million in audit fees for 2013, at an average rate of more than $100,000. The median fee was $46,300 and 17 companies paid more than $1 million in fees; one third paid more than $100,000.

Computing stripes with numbers. Costs, expenses, revenues and profits.Those numbers are dwarfed, though, by the amounts accelerated filers paid. In 2013, about 2,300 accelerated filers paid out more than $8 billion in fees.

But Audit Analytics also found a disproportionate relationship between companies’ revenue and their audit fees. Smaller reporting companies pay more than $5,000 in audit fees (on average) for every $1 million in revenue, whereas large and accelerated filers pay only $479 in audit fees for every $1 million in revenue.

With so many companies of such varying size, and with 420 different audit firms competing for market share, audit fees for smaller companies were all over the map in 2013, ranging from $2.7 million all the way down to a paltry $500. Deloitte & Touche collected the $2.7 million from Diligent Board Member Services.

The Big Four accounting firms have only about a 5% market share in terms of the number of smaller companies audited, but are all in the top 10 in terms of fees. The Global Six — which includes Grant Thornton and BDO Seidman — are all well-represented. Other national firms – including McGladrey, Marcum, Crowe Horwath, and EisnerAmper – also appear in the top 10.

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2 responses to “Small Firms Pay Bigger Slice of Revenue in Audit Fees”

  1. This sounds like economies of scale, the more money a firm makes the more it spread out the cost of audit fees. I am concerned with the smaller companies though, our company paid more than $5,000 per $1MM in revenue this year. Can you break out some of the businesses in the 1-5MM range please?

  2. I am curious if these are just year-end audit fees or if the numbers include fees paid for work during the year leading up to the year-end audit, for quarterly reviews.

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