What's Happening to Audit Fees and Why


by FEI Daily Staff

Financial executives at public companies, private companies, and nonprofits are continually challenged to contain costs. To do that effectively, executives need high-quality, timely, and actionable information.

Acquisitions, reviews of internal controls and inflation continue to be among the leading factors driving increases in audit fees, although large accelerated filers and accelerated filers report success in mitigating the size of audit fee increases.

The annual Audit Fee Survey by Financial Executives Research Foundation (FERF), the independent, non-profit research affiliate of Financial Executives International (FEI), found audit fee trends are diverging among companies of different sizes and types.

In 2015, surveyed public companies experienced a median increase of 1.6 percent, while privately held survey respondents reported a 2.9 percent median increase. Non-accelerated filers experienced the greatest fee rise with a median increase of 4.8 percent, while smaller reporting companies experienced the slightest increase at 2.3 percent.

This trend was amplified over the past four years, during which large accelerated filers experienced declines in the size of their median audit fee change, versus non-accelerated filers. Large accelerated filers saw average increases decline from a median 5.5 percent in 2012 to 3.8 percent in 2015. However, non-accelerated filers reported median fees increased from 1.8 percent in 2012 to 4.8 percent in 2015.

This data suggests greater success among larger companies in mitigating audit fee increases or reducing audit fees by focusing more intently on audit preparedness, improving internal controls, negotiating with auditors, and other initiatives.

Additional key findings include:

  • 2015 audit fees paid by the 6,490 unique filers reporting in both 2014 and 2015 averaged $1.8 million, with a median of $522,205.
  • The average percentage increase in audit fees was 32.5 percent and the median increase, which reduces the effect of outliers, was 3.2 percent.
  • The median increase in audit fees by filer status was greatest for non-accelerated filers at 4.8 percent, and least for smaller reporting companies at 2.3 percent.
  • Over 1,100 filers experienced a decrease in audit fees.
  • Over 300 filers experienced a more than 100 percent increase in fees. These “outliers” tend to explain the significant difference between the average increase of 32.5 percent and the median increase of 3.2 percent.
  • Almost one-fifth of SEC filers reported ineffective internal controls over financial reporting (ICFR).
  • For fiscal 2015, the median increase in audit fees for companies with ineffective internal controls was 5.1 percent, almost two percentage points higher than the median for all SEC filings reviewed.
“We know increasing the efficiency and decreasing the cost of audit fees is integral to controlling overall administrative costs,” said Andrej Suskavcevic, CAE, President and CEO of Financial Executives International and Financial Executives Research Foundation. “We remain committed to studying audit fee data and trends, and coupling this research with opportunities for education and networking to promote best practices in all aspects of the financial audit among financial executives.”

Key drivers of audit fee changes

The audit fees paid by 89 public companies responding to the survey averaged $6.5 million, with a median of $2.4 million. The average percentage increase in audit fees reported was 4.5 percent, and the median increase was 1.6 percent. About one-third of public company survey respondents checked “acquisition” as a reason for an audit fee increase. Only one-fifth checked “review of manual controls from PCAOB inspections.” One-third of the respondents said Sarbanes-Oxley Section 404 compliance has resulted in better internal controls and has been worth the added expense.

Audit fees paid by the 126 privately held companies responding to the survey averaged $258,935, with a median of $102,059. The average percentage increase in audit fees among this group was 6.1 percent, and the median increase was 2.9 percent. About one-third of survey respondents checked “inflation” as a reason for an audit fee increase. Only about one-fifth checked “acquisition.”

Thirty non-profit organizations responding to the survey averaged 2015 audit fees of $159,844, with a median of $84,625. The average percentage increase in audit fees reported was 6.2 percent, and the median increase was 2.3 percent. Just less than one-half (45 percent) of survey respondents checked “inflation” as a reason for an audit fee increase.

Methodology and Sources

FEI’s annual Audit Fee Survey report examines total fees companies paid to external auditors on auditing and related services in 2015. The report is based on responses from 245 financial executives at a mix of public companies, private companies and non-profit organizations. In addition, the report also examines audit fees as reported by the larger pool (6,490) of SEC filers.

Audit fee information obtained from SEC filings has been provided by MyLogIQ. The survey was sponsored by Workiva. Survey results are free for FEI members by visiting the online FERF bookstore at here.