In our latest Small & Mid-Cap Sentiment Index with YouGov, we asked 141 small & mid-sized quoted companies whether their audit fees had increased and, if so, by how much.
We found that:
- 64% of companies report an increase in audit fees (with 7% reporting a decrease)
- The average annual audit fee for these companies was £138,000
- The average annual change was an increase of 26%
Sample comments from survey respondents included:
- "Audit fees for listed companies are out of control. The ability to change is restricted by major investors wanting a top 4 even though in our experience they often add little value. IFRS rules get more complex and more ridiculous every year, rendering statutory accounts now completely meaningless to the average investor. Much of the front end of the accounts are probably never read but auditors and the FRC are making them longer and longer.”
- “Auditors are now beginning to price AIM listed SMEs out of the market, with little capacity in other firms to pick up these companies as the regulator is recruiting heavily from the audit profession. There is the potential for an audit crisis for AIM listed SMEs in the next 18-24 months.”
- “Audit fee inflation appears also to be driven by increasing PLC regulation and audit environment.”
- “Audit is becoming less and less effective as a result of the audit regulator who has lost sight of what and how an audit should be done in the real world. They are driving a box ticking approach with statistical transaction testing that will virtually never find issues. This decreases the value of the audit to all stakeholders.”
This increase in costs is an additional burden for small & mid-sized quoted companies who already bear a disproportionate impact from regulation.
The survey was conducted in October and November 2020. See the full results here.