Differences Between Public and Private, Accelerated and Non-Accelerated Filers Increase in Financial Executives Research Foundation Annual Audit Fee Survey
Morristown, N.J. – Financial Executives Research Foundation (FERF), the independent, non-profit research affiliate of Financial Executives International (FEI), today released the findings of its annual Audit Fee Survey.
The survey found audit fee trends are diverging among companies of different sizes and types. In 2015, public companies surveyed 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, and nonmembers can purchase the results for [$49.95] by visiting the online FERF bookstore at www.ferf.org/reports.
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/reports.
About FEI
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 Workiva
Workiva (NYSE:WK) created Wdesk, a cloud-based productivity platform for enterprises to collect, link, report and analyze business data with control and accountability. Thousands of organizations, including over 65 percent of the Fortune 500®, use Wdesk. The platform's proprietary word processing, spreadsheet and presentation applications are integrated and built upon a data management engine, offering synchronized data, controlled collaboration, granular permissions and a full audit trail. Wdesk helps mitigate enterprise risk, improve productivity and give users confidence to make decisions with real-time data. Workiva employs more than 1,200 people with offices in 16 cities. The company is headquartered in Ames, Iowa. For more information, visit workiva.com.
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