• Audit Fees – The Top Ten

    By • Jun 7th, 2007 • Category: Pure Content


    The Top Ten Reasons Audit Fees Will Not Go Down

    10. The Big 4 as a rule doesn’t reduce fees.
    9. The Big 4 are an oligopoly.
    8. Performing an audit of a large global public company requires specialized skills and they are very expensive and time consuming to develop.
    7. There is a significant constraint on resources who are available to competently perform this work.
    6. The customer has not typically had enough information or been comfortable negotiating scope of services.
    5. There is a high cost when switching providers.
    4. There are non-negotiable deadlines for completing the work.
    3. Audit firms and audit engagements are not organized to incorporate a large proportion of subjective (judgemental) activities versus objective (rote, mechanical, repetitive, formulaic) activities. Auditing Standard 5 is a standard they can’t convert to a repeatable, predictable, easy to train program.
    2. Audit firms have to subsidize their less profitable and less predictable consulting practices. And partners get paid based on how high your fees are!
    1. The PCAOB won’t insist on it. “While “the market will bear out how the new standard affects overall audit costs,” Olson said the PCAOB will monitor AS5 implementation carefully to make sure it allows “room for companies and auditors to evolve.”

    Bonus reason:
    The Audit firms will not reduce the scope of their work, the evidence they insist on to support their opinions, and their insistence on redoing work performed by third parties they do not deem “competent and objective” until they get significant liability reform.

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    2 Responses »

    1. “The customer has not typically had enough information or been comfortable negotiating scope of services.”

      I think this one is key – if only clients realized how important their own staff are to greasing the wheels of the audit. Improving their preparation for the audit would allow them to negotiate fee reductions so effectively!

    2. I agree with Neil. Most companies have hired very poor quality people to work on their s404 and Internal Audit teams. As a result, those guys care more about their job security than to “do it right”.