Across the pond, audit fees are up (22% in four years) and apparently the companies paying these fees are unhappy about it. Financial Times has seen a letter written from CFOs at FTSE 100 companies in the UK to their Big 4 auditors that says “[it is] difficult for us to sit quietly as Big Four audit firms are announcing very significant pay rises,” among other gripes.
Mind, the pay raises they’re complaining about are partner pay (reminder, in the UK they use “rise” not “raise”). Five months ago, it was announced PwC partners in the UK would take home more than £1 million pounds ($1.2 million) each, an all-time high. Same for Deloitte, their UK partners were to receive an average of £1.1 million for the fiscal year. All while firms are charging more than ever for assurance services. Per Audit Analytics, these FTSE 100 companies paid their auditors more than £1 billion in 2021. So that’s why they are pissed.
FT:
In the letter to the accounting firms seen by the Financial Times, the finance heads said: “At this time of increasing cost pressure on big business we should not be expected to pick up the escalating costs within service company supply chains through further price increases.”
Ballooning costs meant companies “continue to struggle with our own profitability” and were having to be more efficient rather than passing costs on to customers, the CFOs said in the letter sent last month.
It was therefore “difficult for us to sit quietly as Big Four audit firms are announcing very significant pay rises”, they added.
…
The letter drew a blunt response from audit partners at the Big Four, one of whom said: “[The CFOs] do not commission our work and they are not the ones who we are reporting to.”
Suck it, CFOs.
A partner FT spoke to said the CFOs have a valid point. FT added:
The firms’ UK arms had “done a good job of driving audit fees up” in recent years “under the auspices of quality improvement”, but the increases had been bigger than in other countries, the partner said.
👀
Interestingly, or perhaps obviously, this criticism is similar to what we hear from staff toward the bottom of the ladder. Revenues are breaking records, partners are making more than ever, clients are paying more for the same services, and yet salaries have stagnated. Maybe next year firms shouldn’t be so transparent about partner pay?
FTSE 100 CFOs tell Big Four to cut costs after audit price jump [FT]
It’s almost as if the oligopoly participants know they will only have the audit for 10 years and are prioritizing short-term gains over a (non-existent) long-term value proposition. What a totally unexpected and completely unforeseeable consequence of mandatory firm rotation.
the UK has much more restrictive independence requirements – I’m not entirely surprised fees are higher there than other countries.