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FERF Survey: Audit Fees Down, Big 4 Still Dominate Public Company Filers

This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.

It looks like audit fees are stabilizing.

The 150 publicly-held companies responding to a recent survey paid an average of $4.8 million in audit fees in 2009, down 2.4 percent from the total shelled out by these respondents the prior fiscal year.

The 197 privately-held companies responding to the survey paid an average of $291,200, roughly even with the prior year.

Drilling further down, the survey found that total audit fees for 83 large accelerated filers-those with market capitalizations over $700 million–averaged $7.8 million, 3.6 percent less than what they paid the prior year. What’s more, this average of $7.8 million was possibly skewed to the high side this year due to the total audit fees reported by the 19 respondents from companies with more than $25 billion in annual revenues.

On the other hand, the average audit fees paid by the 22 non-accelerated filers were $579,900, 3.3 percent more than what they paid in the prior year.

These are some of the highlights of a newly-released annual report from Financial Executives Research Foundation (FERF), the research affiliate of Financial Executives International. It stresses that the averages reported in this year’s Audit Fee Survey are not comparable to those reported in the 2009 survey because this year’s respondents are not necessarily the same as last year’s respondents. In fact, FEI stresses that this year’s average was skewed slightly higher due to representation from more companies with revenues of $25 billion or more.

The survey also found that the total number of audit hours averaged 21,458 for all public companies, and-not surprisingly–was directly proportional to both the size of the company and to the number of legal entities comprising the company. Of the 19 respondents from companies with more than $25 billion in annual revenues, the total hours averaged 108,571.

The average hourly audit rate was $218 for all public companies–$186 for nonaccelerated filers and $220 for the large accelerated filers. Surprisingly, the survey found that the lowest hourly rate ($110) and the highest hourly rate ($400) were both reported by large accelerated filers. It said the $110 rate was reported by a large multi-national consumer goods distributor and the $400 rate was reported by a large multi-national financial services firm.

Other interesting findings:

• 88 percent of public company respondents used Big 4 audit firms compared to 36 percent of private companies.

• After the Big 4, Grant Thornton was mentioned by four respondents and BDO and McGladrey were both mentioned once.

• 21 of the 197 private companies plan to switch auditors, compared to only 7 of the 150 public company respondents. Service issues and fees were key reasons for both groups.

• Just 16 of the 150 public companies indicated that their auditors broke out the cost of the Section 404 attestation.