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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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