Auditor fees, both audit and non-audit, reached $18.9bn in FY21, a rise of 3.3% on the previous year, and the largest jump since 2017, according to the findings of the latest industry report from Audit Analytics – an Ideagen solution.
And while this is two-and-a-half times the cost of the Tokyo 2020 Olympic games, it isn’t necessarily a bad thing, as Research Analytics Manager for Ideagen, Nicole Hallas, explains:
“Audit fees are an indicator of audit complexity and risk. Higher risk audits require more auditor resources to reduce audit risk to an acceptable level. Analyzing fees by industry, company size, and location illustrates the level of risk and auditor effort across various sectors of publicly listed companies.
“After studying more than 7,000 filings to the US Securities and Exchange Commission (SEC) in FY21 we can see that, while audit fees have increased, non-audit fees have continued to decline which is indicative of the global focus on restricting certain services to safeguard auditor independence.”
This relates directly to regulations introduced in the US and many European countries to restrict the type of non-audit services auditors can offer and, in many cases, the amount auditors can be paid for allowable non-audit services.
Interestingly, the report, which tracks audit fee trends over the last twenty years, also shows no movement in the top 6 auditors ranked by audit fees compared to FY20.
“Large companies collectively paid over $12 billion in audit fees in FY21, averaging $5.2 million each in audit fees,” added Nicole.
“It’s therefore perhaps not unexpected to see little movement in the rankings as you would expect the biggest global audit firms to be most likely to audit these large companies.”
Other key findings show that while audit fees are increasing, the audit fee to revenue ratio declined, due largely to the decrease in revenues during the COVID-19 pandemic, and average audit fees are still below 2018 and 2019 levels.
Audit Analytics is one of Ideagen’s portfolio of solutions to support governance and regulatory compliance. Their team of researchers collect, analyse and organise financial and accounting data to support the financial industry and academics with their research, risk assessments and decision making.
Their reports cover a wealth of issues relating to financial service activity including SOX disclosures, financial restatements and cybersecurity breaches. To find out more visit www.auditanalytics.com