Big firm audit fees continue to rise
Less competition means larger audit fees – but there are alternatives out there
When it comes to situations that cause you sleepless nights, finding a decent auditor when you need one is unlikely to come at the top of the list.
That may well change soon if your company requires an annual audit. It’s because, according to this year’s Key Facts and Trends report by the Financial Reporting Council, 304 accountancy practices have surrendered their audit licence since December 2014. That’s 4.6% of firms offering audit services.
It’s the latest dip in an on-going trend. Today there are only 6,331 firms in the UK licenced to undertake audits, compared to just under 10,000 as recently as 2004.
There are lots of reasons for the fall, but chief among them is the fact that growing numbers of firms are no longer required to undertake a statutory audit. In January this year, the audit exemption threshold was re-aligned to exempt companies that meet two of these three criteria:
- 50 employees or fewer
- Gross assets of £5.1m or less
- Turnover of £10.2 million or below.
There are numerous benefits for all companies, both large and small, of having their accounts and their financial systems and controls audited – but this is a different matter for a different blog. For those companies that now fall out of audit there are also a range of options to get an independent review of things, without a full audit, which should also be fully explored.
That has been good news for smaller companies taken out of the audit cycle, even if it is less profitable for accountancy firms offering audit services. And, in my opinion, that’s exactly how things should be.
But the fact remains that, for those firms required to undertake a statutory annual audit, finding an accountant with the expertise and the licence to do the job has been getting steadily more difficult.
Audit fees rising
The Big Four accountancy firms (PwC, Deloitte, Ernst & Young and KPMG) clearly realise that it’s a seller’s market when it comes to audit services – their income (including audit fees) derived from PIE (Public Interest Entity) clients has recently jumped by 6.7%, compared to 4.7% for auditors outside the Big Four.
All of which suggests to me that, if you want to cut your audit fees, it’s time to start looking beyond the big name accountancy firms for a better deal. Certainly, while our qualified auditors at THP have seen smaller clients drop out of the statutory audit net, larger companies have come to us for a better deal. As a Top 100 accountancy firm, we offer first-rate audit services, but with a more personal touch.
So, if your firm no longer has to be audited, beware. The apparent cost savings in auditors fees are often far outweighed by the costs suffered from the loss of this crucial, independent review. But if you still need that statutory audit, or interested to see what other options are available to you, why not get in touch to find out how we can help you.
I’m pretty sure we’ll help make sure those sleepless nights never happen!