Average audit fees have continued to rise in recent years, increasing nearly 4% from 2019 to 2020, from $ 2.43 million to $ 2.52 million, according to a new survey.
The investigation, from the Financial Education & Research Foundation of Financial Executives International and the Center for Audit Quality, found that 49% of respondents cited an increase in audit scope in the same year. Additionally, 58% of respondents said efforts to support external audits have increased. The report is based on responses from over 51 public company finance executives and a survey of 80 public company audit engagement partners.
The audit fee study examined different factors affecting financial reporting and external audit, including opportunities for SOE preparers to reduce audit efforts, the impact of COVID-19 , the value derived from external audits, auditor information and issues causing increased audit costs.
According to the survey, 28% of all respondents cited acquisitions as the main driver of these trends. Another factor, cited by 23% of all respondents, was the impact of the economic uncertainty of 2020 on the scope of the audit, followed by the implementation of the current Financial Accounting Standards Board (CECL) standard. , disposals and changes in internal controls over financial reporting. (ICFR) not linked to COVID-19.
Looking only at audit engagement partners surveyed, 57% indicated that the scope of their most recent integrated audit engagement had increased compared to 2019-2020. Economic uncertainties stemming from the COVID-19 pandemic have been cited as the main driver for the increased scope and audit efforts. Other factors included non-COVID-related ICFR changes, acquisitions, the Public Company Accounting Oversight Board’s requirements for disclosing critical audit matters, and the transition to virtual audit in the wake of the pandemic.
Additionally, 61% of those surveyed said their auditor’s use of data analytics and other emerging technologies improved the quality of their external audit.
The pandemic strongly affected the 2020 audit cycle. The study found that the 2020 audit cycle was unprecedented for the financial reporting ecosystem, entities and their auditors, especially when it was was about determining how to successfully address the challenges of continuing to provide high quality financial reporting and audits to capital markets. . Looking ahead, three major factors that may impact the audit fee market are potential future regulation, demand for audit services and professionals, and cybersecurity.
ESG also continues to emerge as an area of ââinterest for finance professionals and auditors, as 40% of respondents said they disclosed the climate-related risks that were considered when preparing for their 2020 financial statements.
“The current COVID-19 pandemic continues to pose challenges for auditors and preparers, and as such, building confidence in financial reporting and related internal controls over financial reporting was more important than ever this year. â, Said Andrej Suskavcevic, president and CEO of Financial Executives International and Financial Education & Research Foundation, in a statement Tuesday. âThe shift to virtual working environments, improved communication and harnessing technological capabilities were critical in building that trust and essential in continuing to ensure the timely delivery of high quality reports. “
FEI also began hosting its annual Current Financial Reporting Insights conference on Tuesday. âAs finance professionals, we are ready to not only support, but lead at a time of constant change,â said Sue Taylor, chief accounting officer at Meta, Facebook’s newly renamed parent company, in presenting the conference. âChange is not very easy and financial leaders face unique challenges in adjusting to changing priorities. “
Taylor interviewed Cathy Engelbert, the former CEO of Deloitte who is now commissioner of the Women’s National Basketball Association. âI should probably give more credit to having worked in accounting and financial reporting for over three decades,â Engelbert said of his career. âYou don’t realize how exposed you are until you’re outside, how many emerging issues, whether it’s sustainability and climate change, labor issues, the chain procurement, employee benefits, mergers and acquisitions, digital technology. I can’t tell you how useful these have been to me, believe it or not, in my new sporting life. Even if you think you are doing business financial reports or processes, internal controls or audits, you are learning a lot more about how to transform businesses, and this is what I brought to the WNBA .