What began as a survey to benchmark the cost of compliance with Sarbanes-Oxley Section 404 expanded in scope to consider all facets of the audit, including audit fees, audit-related fees, and fees for tax services.
Last year’s Annual Audit Fee Survey results revealed an increase in audit fees of 4.5 percent for public companies over prior year’s ; and the reasons indicated were primarily due to Public Company Accounting Oversight Board (PCAOB) inspections. These findings were timely and confirmed concerns that have been expressed by preparers. The PCAOB recognizes that most preparers experienced an expansion of audit work because of the unintended consequences of the PCAOB inspections.
Jay Hanson, Board Member of the PCAOB, who recently spoke at the 11th Annual Life Sciences Accounting & Reporting Congress shared, “What we hear from the preparer community often echoes what we hear from audit committees. Some believe that our actions are causing their auditors to spend more time than necessary on ‘busy work’ or ‘check the box’ compliance activities without adding much value to the audit process.” He continued, “We also hear that some auditors may not be performing effective risk assessments, but rather are treating all areas as a risk in order to avoid a PCAOB finding.” .
The 2014 survey also disclosed that the average audit fees of private companies and non-profits increased by 3.4 percent and 1.5 percent, respectively, with inflation being the primary driver.
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