Companies Report Signs of Stabilization with 2009 Auditing Process
– Relationship between External Auditor and Company Remains Strong –
– Companies Satisfied With Auditor Performance –
A newly-released report from Financial Executives Research Foundation (FERF), the research affiliate of Financial Executives International, revealed optimistic trends in the 2009 auditing process, suggesting that companies are well-adjusted to the financial reporting involved with the Sarbanes Oxley Act of 2002. Companies surveyed indicated a leveling in their average audit fees, and expressed overall contentment with their relationships with their external auditors.
The Audit Fee Survey, which is conducted annually by FERF, polled nearly 350 executives, representing both United States’ publicly held companies (of which 85 percent were accelerated filers with total market capitalizations of more than $75 million), privately held companies and foreign companies, to examine the total fees companies paid to external auditors in 2009 and their overall satisfaction with their audit firms.
This year’s survey took a closer look at companies’ perceptions of their external auditors and the overall auditor relationship. Respondents expressed satisfaction with their current auditor, and very few revealed intentions to change them – only 11 percent of private companies and five percent of public companies plan to make a switch. On average, both public and private companies also gave their auditors positive marks across the board, rating them with scores ranging from 3.6 to 4.3 (based on scale of one to five, with five being “very good”) in areas that included communication, technical skills, knowledge of their business, status reporting, audit administration, global coordination and audit efficiency. Public companies also reported an average 16-year relationship with their current auditor.
Respondents experienced stabilization in their external audit fees in 2009. Publicly held companies surveyed this year paid on average $4.8 million in total audit fees for fiscal year 2009. While the average was skewed slightly higher this year due to representation from more companies with revenues of $25 billion or more, public company respondents reported that their own organization’s audit fees decreased from the prior year.
Similarly, this year’s private company respondents reported an average of $291,200 in 2009 audit fees, stating that the amount was almost identical to the fees they paid in the prior year.
In terms of “man hours,” public company audits averaged approximately 21,458 hours in 2009, while private companies averaged about 2,606 hours.
Other key findings from the survey include:
§ For public companies, the hourly audit fee rate per hour averaged $218 ($186 for non-accelerated filers and $220 for the large accelerated filers). Interestingly, the lowest hourly rate ($110) and the highest hourly rate ($400) were both reported by large accelerated filers. For private companies, the hourly audit fee rate per hour averaged $185 ($159 for the smallest companies to $243 for companies with annual revenues of $1 billion to $4.9 billion.)
§ Average audit fees of companies with centralized operations were significantly less than those with decentralized operations, for both public and privately-held companies. In particular, public companies with centralized operations paid $1.9 million for their annual financial statement audits, while those with decentralized operations paid $7.7 million in 2009.
§ An overwhelming majority of public company respondents (88 percent) used one of the “Big Four” audit firms, compared with about a third (36 percent) of private company respondents.
§ Public companies responding to the survey were, on average, larger than the private companies responding in terms of annual sales revenues. They were also comprised of more legal entities (68) than the private companies responding (11).
§ Most large accelerated filers list their shares on the NYSE Euronext Stock Exchange, while most of the smaller publicly held companies list their shares on Nasdaq.
Additional findings include an analysis of the overall audit experience for companies.
Detailed figures for audit fees are available online through AuditFeeCheck, FEI's online search tool. Responses can be searched based on all criteria, including title, company type and company size.
The full press release is available on the FEI press room Web page.