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June 28, 2010

US audit fees stabilised in 2009

The majority of companies are satisfied with
their auditor performance, according to a survey conducted by the
Financial Executives Research Foundation (FERF).

The survey, Audit Fee Survey,
examined the total fees companies paid to external auditors in 2009
and their overall satisfaction with audit firms.

The report found many companies experienced
stabilisation of external audit fees in 2009.

For public companies, the hourly audit fee
rate averaged at $218. This was $186 for non-accelerated filers and
$220 for the large accelerated filers. The lowest hourly rate was
$110 and the highest hourly rate was $400, both reported by large
accelerated filers.

For private companies, the hourly audit fee
rate averaged $185. This was $159 for the smallest companies to
$243 for companies with annual revenues of $1 billion to $4.9
billion.

Publicly-held companies paid on average $4.8
million in total audit fees for fiscal years ending in 2009. Public
company respondents reported their own organisation’s audit fees
had decreased from the prior year. 

Private companies reported their audit fees
averaged at $291,200, which was a similar rate as the previous
fiscal year. 

In terms of man hours, public company audits
averaged 21,458 hours in 2009, while private company audits
averaged 2,606 hours.

The survey also found 88% of public company
respondents used the Big Four – Deloitte, Ernst & Young, KPMG
or PricewaterhouseCoopers – for their audits compared with 36% of
private company respondents.

Driving down prices

International Accounting Bulletin’s
2010 US survey found that fee pressure in the 2008/2009 fiscal year
eroded the annual revenue of audit firms. This was partly due to
fee cuts of between 5 to 15 percent as well as a tendency for some
firms to pitch very low prices to prospective clients in order to
keep audit teams busy.

“US audit firms are finding the bidding
process much more competitive and are approaching a broader range
of clients for work than in the past,” International Accounting
Bulletin
editor Arvind Hickman said. “This means the Big Four
are reaching down into traditional mid-tier territory, and vice
versa, although the largest listed companies will continue to
remain a largely Big Four market.

“Fee pressure will certainly be a feature of
this current fiscal year, although leaders are hopeful that it may
be relieved, somewhat, in the 2010/2011 fiscal year. Value-adding
services, innovation and streamlining the audit process will
continue to be important considerations for firms, which should
prove beneficial to their future operations.”

For its survey, FERF polled about 350
executives representing both US publicly held companies, of which
85% were accelerated filers with total market capitalisations of
more than $75 million, privately-held companies and foreign
companies.

 

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