Audit fee increases varied widely in 2015 depending on the size and type of company being audited, according to a new survey.
The median audit fee increase paid by SEC filers was 3.2% in 2015 over the previous year, according to an annual audit fee survey conducted by the Financial Executives Research Foundation (FERF). The survey reflected data reported by 6,490 companies in SEC filings.
On a more granular level, the median fee increase for SEC filers showed significant variation. Median fee increases based on category were:
- 4.8% for nonaccelerated filers (defined in Rule 12-b, with a public float of less than $75 million).
- 3.8% for large accelerated filers (aggregate worldwide market value of at least $700 million).
- 3.0% for accelerated filers (aggregate worldwide market value of $75 million to $700 million).
- 2.3% for smaller reporting companies (public float of less than $75 million).
Some companies were able to more effectively mitigate audit fee increases—and in some cases reduce fees—by focusing more intently on preparing for audits, improving internal controls, and negotiating with auditors.
Meanwhile, 126 privately held company respondents to the FERF survey indicated a median increase of 2.9%, and 30 not-for-profits responding to the survey reported a median increase of 2.3%.
The reasons cited for audit fee increases also varied based on the type of respondent:
- Public companies. Among the 89 public companies that responded to the survey, 51 said they experienced audit fee increases in 2015. Among those who experienced increases, about one-third (31%) said acquisitions were a reason for an audit fee increase, and 22% cited “review of manual controls from PCAOB inspections” as a reason for an increase. One-third of all public company respondents said Sarbanes-Oxley Section 404 compliance has resulted in better internal control and has been worth the added expense, while 30% said the resulting better internal control was not worth the added expense, and 7% have seen no increase in internal control.
- Privately held companies. Audit fees increased for 73 of the 126 privately held companies participating in the survey. About one-third (34%) of those who experienced an increase said inflation was a reason for an audit fee increase, and 22% cited acquisitions.
- Not-for-profits. Twenty of the 30 respondents experienced an increase in audit fees, and almost half (45%) of them said inflation was a reason for an audit fee increase.
The full survey report is available at the Financial Executives International website for free for FEI members and for purchase ($49.95) by nonmembers.
—Ken Tysiac (email@example.com) is a JofA editorial director.