– Financial Executives Research Foundation 2014 Audit Fee Survey Reports
Public Companies Paid on Avg $7.1 Million in Audit Fees –
Morristown, N.J. –
Financial Executives Research Foundation (FERF), the independent, non-profit research affiliate of Financial Executives International (FEI), the association of choice for CFOs and other senior-level financial executives, today released the findings of its annual Audit Fee Survey. Public and private companies, as well as non-profits, saw an overall increase in their audit fees in 2013 over the previous year1
, with public company fees being particularly impacted by recent Public Company Accounting Oversight Board (PCAOB) inspections.
Sponsored by Silicon Valley Accountants and Hyland, FERF partnered this year with Audit Analytics® for the 2014 Audit Fee Survey and received responses from nearly 400 financial executives. The survey examined the total fees companies paid to external auditors in 2013, and a number of topics related to the auditing process. Responses represent U.S. publicly-held companies, privately-held companies and non-profit organizations.
This year’s survey revealed that public companies
paid on average $7.1 million in audit fees, representing an increase of 4.5 percent over last year’s audit fees paid1
. Of those that responded, the number of audit hours required for a public audit averaged 17,525; which is estimated to be an average of $249 per hour.
Respondents indicated that the increase in their 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 percent changed their control documents as a result of the PCAOB requirements or inspection feedback.
In comparison, the total audit fees paid by privately-held company
respondents in 2013 averaged $174,858, which respondents indicated was 3.7 percent higher than last year1
. Of note, private company respondents with less than $25 million in annual revenue experienced on average nearly a 12 percent increase in their audit fees from the previous year.1
The number of audit hours required for a private company averaged 2,927 hours, estimated to be $179 per hour. Non-profit organizations
paid an average annual audit fee of $73,023 in 2013, representing an increase of 1.5 percent. The majority of private companies (60%) and non-profit organizations (67%) attributed the increase to inflation.
“FERF’s annual Audit Fee Survey provides insight for benchmarking audit fees and experiences, and this year’s report shows that after ten years, companies on average are seeing increases in the fees paid to auditors,” said Marie Hollein, President and CEO of Financial Executives International and Financial Executives Research Foundation. "Public companies in particular have seen an impact of the PCAOB inspections as a contributor to this year’s uptick."
Other key findings from the survey include:
- More than half of public company respondents (57%) indicated an increase in internal cost of compliance with Sarbanes-Oxley Section 404 within the past three years. However, many stated they believe they now have improved internal controls, making it worth the additional overall expense.
- The large majority of public company respondents (92%) stated that their boards annually assess their audit firm’s performance and independence qualifications. Sixty-one percent of private companies and 65 percent of non-profits indicated that their boards annually assess their audit firm’s performance and independence qualifications.
- Public companies have used their audit firm for an average of 23 years, nearly three times the average auditor relationship reported by private companies and non-profit organizations (8 years). Ninety-one percent of public companies use the “Big Four” audit firms. Regardless of the length of service, responses received from public companies indicate they are all compliant with the five year lead partner rotation rules.
Survey results are free for FEI members, and nonmembers can purchase the survey results for $49.95 by visiting the FERF bookstore online at www.ferf.org
Financial Executives International is the leading advocate for the views of corporate financial management. Its more than 10,000 members hold policy-making positions as chief financial officers, treasurers and controllers at companies from every major industry. FEI enhances member professional development through peer networking, career management services, conferences, research and publications. Members participate in the activities of 74 chapters in the U.S. and a chapter in Japan. FEI is headquartered in Morristown, NJ, with a Government Affairs office in Washington, D.C. Visit www.financialexecutives.org
for more information.
About Financial Executives Research Foundation, Inc.
Financial Executives Research Foundation (FERF) is the non-profit 501(c)(3) research affiliate of Financial Executives International (FEI). FERF researchers identify key financial issues and develop impartial, timely research reports for FEI members and nonmembers alike, in a variety of publication formats. FERF relies primarily on voluntary tax-deductible contributions from corporations and individuals, and publications can be ordered by logging onto www.ferf.org
About Audit Analytics®
Audit Analytics is an independent research provider of audit, regulatory and disclosure intelligence. Through an easy-to-use online interface, Audit Analytics enables the accounting, legal and investment communities to analyze auditor market intelligence, public company disclosure trends and risk indicators. For more information please contact firstname.lastname@example.org
About Silicon Valley Accountants
Silicon Valley Accountants, sponsor of this report, is a unique CPA firm focused on solving challenges facing accounting and finance through a balanced approach of teamwork enhancement, information integration and process optimization. The firm’s approach utilizes a LEAN/Agile Financial Effectiveness Framework which increases the ROI of existing technology investments, improves leadership, and reduces the risk of employee turnover and compliance costs.
Hyland, creator of OnBase, sponsor of this report, is one of the largest independent enterprise content management (ECM) software vendors in the world. Hyland’s ECM solution, OnBase by Hyland, helps customers improve customer service, meet regulatory compliance, reduce operating, SOX and Audit costs, all while promoting dynamic knowledge management resulting in workforce enhancement.
Julia DePaul Lili DeVita
FTI Consulting FEI
The averages reported in this report are not comparable to those reported in the 2013 Audit Fee Survey because this year’s respondents are not necessarily the same as those of last year.