Audit Fees Up 2.2% in 2008

Public company audit firms upped their fees 2.2 percent in 2008, according to the latest Financial Executives Research Foundation (FERF) Audit Fee Survey.

However, that increase may not translate into fatter paychecks for employees since a majority of company officials also reported taking on more work internally and considering a change in audit firms.

The Audit Fee Survey polled over 360 executives from U.S. publicly held companies (76% of those were either accelerated filers or large accelerated filers), privately held companies and foreign companies to gauge the total fees companies paid to external auditors in 2008 and overall satisfaction with audit firms.

According to the survey, publicly held companies paid on average $3.7 million in total audit fees for fiscal year 2008, representing an increase of 2.2% over total audit fees paid for the prior fiscal year.

Total audit fees paid by privately held companies responding to the survey averaged $219,500, a 3.7% increase over the prior year.

Public company audits averaged approximately 9,881 hours in 2008, and their average blended audit fee rate was $216 per hour ($196 for non-accelerated filers and $217 for the accelerated filers).

Private companies averaged about 1,903 hours at a blended audit fee rate of $179 per hour ($152 for the smallest companies to $230 for the largest).

If you’re working for a regional or local firm, you know retaining clients is an on-going challenge. Nearly a quarter of the private company respondents said they re-bid their audit work every four to seven years, while only 11 percent of public companies put the engagement out for bid in the same time frame.

“In addition, 15 of the 245 private companies plan to switch auditors,” the survey says, “compared with only two of the 110 public company respondents. Companies that expressed intention to change auditors cited services issues as a primary concern."

Looking ahead, the survey turned up differences in what companies expect to pay for future audits. A scant 19 percent of public company officials expect audit fees to increase.

By contrast, half of private company respondents expect audit fee increases of 2 percent to 10 percent in 2009.