Accounting

Audit Fees Increases Hinge on Size and Situation

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 the 2015 audit year, the median increase for all filers reviewed through SEC filings was 3.2 percent, with public companies that responded to our survey reporting a median increase of 1.6 percent and privately held filers, also surveyed, reporting a median increase of 2.9 percent.   Median fee increases also varied by company size, with non-accelerated filers reporting higher median increases than large accelerated filers, accelerated filers and smaller reported companies.   The survey results indicate fee trends are diverging among companies of different sizes. Over the past four years, large accelerated and accelerated filers experienced declines in the size of their median audit fee change. Large accelerated filers, for instance, saw average increases decline from a median 5.5 percent in 2012 to 3.8 percent in 2015.   In contrast, non-accelerated filers report median fees increasing from 1.8 percent in 2012 to 4.8 percent in 2015.   This likely suggests larger companies have had greater success with efforts to mitigate audit fee increases or to reduce audit fees, such as increasing audit preparedness, negotiating with auditors, improving internal controls, and other initiatives.   Other Key Findings From SEC Filings Include:   Audit fees paid by the 6,490 unique filers for their 2015 audits 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.   However, over 300 filers experienced an increase in fees of more than 100 percent. These “outliers” tend to explain the...

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