The median audit fee paid in 2014 by public companies registered with the US Securities and Exchange Commission (SEC) was $402,812, resulting in a median increase of 3.4 percent over fees paid the previous year, according to a new study by the Financial Executives Research Foundation (FERF).
The annual Audit Fee Survey from FERF, the independent, nonprofit research arm of Financial Executives International, examined total fees companies paid to external auditors in 2014 based on responses from 220 financial executives. The report also looked at audit fees reported by a larger pool of SEC filers of more than 7,000 organizations.
Audit fees paid by SEC filers last year averaged $1.5 million, according to the report. In addition, nearly 21 percent of SEC filers reported ineffective internal controls over financial reporting, resulting in a median increase in audit fees that was 3 percentage points higher than the median for all SEC filers.
Public companies as a whole realized a 3.1 percent median increase in audit fees last year, due primarily to acquisitions and the review of manual controls resulting from Public Company Accounting Oversight Board (PCAOB) inspections, according to the report.
Audit fees paid by private companies averaged $254,740 in 2014, with a median of $70,000, resulting in an average increase of 2.7 percent over the prior year and a median increase of 2 percent. Private company respondents with less than $5 million in annual revenue realized an average audit fee increase of nearly 11.2 percent over the previous year, with a median increase of 6.7 percent. The number of audit hours required for a private company averaged 2,800 hours, with a median of 850.
Nonprofit organizations paid an average annual audit fee of $107,208 in 2014, representing an average increase of 1.3 percent, while the median of $36,440 in 2014 remained flat. The majority of private companies (60 percent) and nonprofit organizations (65 percent) attributed the audit fee increases to inflation, according to the report.
Other key survey findings include:
- Fifty-seven percent of public companies whose audit firms were subjected to the PCAOB's oversight review indicated that their audit firms shared the comments they received from the PCAOB. In addition, 45.3 percent of respondents were required to change their controls as a result of PCAOB requirements or findings. However, none of the survey respondents indicated that the PCAOB inspections resulted in a restatement of financial statements.
- A majority of public companies indicated that the volume of annual audit work by external auditors in 2014 increased compared to 2013, in order to obtain both an auditor's report on the financial statements (69.3 percent) and an auditor's report on internal controls (63.2 percent).
- Over half of respondents (58.7 percent) indicated an increase in the internal cost of compliance with Sarbanes-Oxley Section 404 within the past three years. However, 45.3 percent saw an improvement to their internal controls and were satisfied with the additional expense.