Posts Tagged ‘Audit prices’

Tim Reason, editorial director of CFO.com and award winning business journalist, has a new article out in this month’s CFO Magazine, “Auditing Your Auditor.”  It is always a pleasure to read his work, and his current piece is no exception.

His focus  is on audit fees.  As everyone knows there are three certainties in life:  death, taxes, and CFOs complaining about pricey audit fees.  About 2,500 public companies (out of 9,500 SEC reporting companies) pay at least $1,000,000 per year in audit fees.

Audit prices have been on a roller coaster in recent years.  When the Big 8 industry evolved into the Big 4, a smaller pool of major audit providers led naturally to higher prices.  Eventually, though, audits become commoditized (and coupled with consulting fees) and prices fell.  Following the turmoil of the early 2000s and passage of Sarbanes-Oxley, audit prices went through the roof.  Recently, however, prices have been dropping.  Reason cites information gleaned from AuditAnalytics reports that supports a conclusion that audit fees have been dropping as a percentage of a client company’s revenues even as corporate revenues have declined during the recent recession.

Reason reasons that declining audit fees result from three factors:

  1. Benefits realized from SOX required internal controls,
  2. Increasing trend for companies to shop for a new auditor on price considerations only, and
  3. CFO’s comparing their audit fee against a benchmark of average fees paid by their peers.

I wonder, though, if this is the complete story.


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