EY has written to the audit committee chairs of the FTSE-350 companies audited by the firm ‘to explain the current audit market dynamics, the investments we are making and the associated implications for their audit fee’.

EY UK head of audit Hywel Ball said: “In order to maintain our investments to deliver consistent high-quality audits, ensure the profession remains attractive to top talent, and meet the increased costs of regulatory compliance, it is clear that audit fees must rise. It is important that the economic returns of audit support the financial resilience required and that the companies we audit are also committed to quality governance and corporate reporting.”

EY says audit quality is ‘a key priority’ for the firm, adding that: “We have increased our investment in audit quality in the UK over the last five years to £25m per annum and the number of people dedicated to EY’s audit quality programme by over 25% in the last 12 months alone. We continue to make significant investments in compliance, technology, recruitment and the development of our people to enable us to provide the highest performing teams, drive greater innovation in the use of technology, and deliver the sustainable high-quality audits that stakeholders demand.

“As the Competition and Markets Authority (CMA) highlighted in its recent report, the costs of mandatory audit tendering and switching have also largely been absorbed by the audit firms, leading the CMA to conclude that loss-making audits are anti-competitive and intra-firm subsidisation inappropriate.”