Audit fees increased 6% from 2018 to 2019 due to expanded audit scope, according to the latest survey of more than 50 financial executives at public companies and an additional survey of 88 audit engagement partners from the Financial Education and Research Foundation.
The 11th Annual Public Company Audit Fee Study found that 56% of public company respondents cited accounting standards changes as the major driver of the fee increase, with 21% citing acquisitions as the second largest. In addition, 42% of auditor respondents indicated that changes to internal controls over financial reporting contributed most to their team’s effort to complete the most recent audit.
In dealing with the pandemic, 69% of public company respondents indicated that their external audit and quarterly reviews had been impacted to some extent by COVID-19. Specifically, the virtual execution of internal controls and virtual retention of internal control documentation had the most effect on those processes – each being confirmed by 50% and 48% of respondents, respectively. Looking ahead, 87% of public company respondents expect an increase in virtual meetings with external auditors, while 83% of public company respondents anticipate a reduction in audit team time spent on site as a result of the pandemic.
Among other notable findings, 77% of public company respondents stated that their public auditor provided permissible insights and 82% stated that their auditors have deployed data analytics or emerging technologies as part of the audit process.
“Despite the disruption to the financial reporting process caused by COVID-19, public companies and their external auditors showed amazing adaptability and agility,” says Andrej Suskavcevic, president and CEO of Financial Executives International and the Financial Education & Research Foundation. “The partnership between public companies and their external auditors, especially this year, was paramount to being able to continue to report high-quality information in a timely manner.”