Average audit fees increased by 6.4% in 2023—from $2.83 million in 2022 to $3.01 million the following year—according to the 15th Annual Audit Fee Survey and Insights Report from the Financial Education & Research Foundation (FERF), the nonprofit research affiliate of Financial Executives International (FEI).
The annual report examines various factors affecting financial reporting and external audits. Representatives from 123 private companies/nonprofits and 50 public companies participated in the survey, which was conducted between August and October 2024. In addition, the report also examines audit fees as reported by more than 4,000 Securities and Exchange Commission filers provided by the Calcbench financial data platform.
According to the latest report, which was released last month, 57% of respondents indicated working harder to support the 2023 audit as compared to the previous cycle. Changes to internal control over financial reporting were cited as the most common increase in company audit effort (43%), followed by 29% for changes to organizational structure, mergers and acquisitions, and turnover in company or audit team staff, respectively.
Seventy percent of respondents indicated that the audit increased the quality of financial reporting. The lack of significant changes from standard setters and regulators contributed to a relatively calm audit landscape allowing for process improvements, FERF noted in the report.
The Public Company Accounting Oversight Board’s (PCAOB) emphasis on internal controls and processes, coupled with companies’ continuing digital transformation initiatives, are driving elevated IT audit efforts, the report states. In 2023, 53% of respondents noted an increase in their auditor’s IT audit effort—and that percentage is expected to rise in the coming years.
Artificial intelligence has been applied to fewer than 20% of public company audits and fewer than 3% of private company audits, the report says. The use cases for AI haven’t evolved beyond other tools such as general ledger anomaly detection and financial statement tie-out.
“Over the past couple of years of relative calm in the financial reporting ecosystem, our members worked with their auditors to deliver high-quality financial reporting,” Andrej Suskavcevic, CAE, president and CEO of FEI and FERF, said in a statement. “As financial stewards, our members are keenly aware of the impacts of inflation on their audit fees and, by extension, their organization. We expect to see further increases in audit fees as notable changes to financial reporting unfold. Specifically, the Financial Accounting Standards Board’s disaggregation of income statement expenses standard represents a potentially large burden to implement and audit. In addition, audit firms will need to implement and comply with several new PCAOB standards in the next several years.”
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Tags: Accounting, Auditing
