According to the most recent annual report, total audit fees climbed in fiscal year 2021 as the number of Securities and Exchange Commission (SEC) registrants reached its highest level in six years.
Total audit fees increased by 3.3 percent from 2020 to $18.9 billion, according to Audit Analytics' 20th annual study of trends in audit and non-audit fee expenditures at public companies. The greater number of registrants (7,133), the greatest since 7,150 were added in 2015, was the main factor for the increase.
Over the past three years, new accounting rules for sales, leases, and credit losses have taken effect, necessitating substantial adjustments to registrants' accounting and financial reporting procedures and controls. These changes make audits more complicated and necessitate longer audit periods (and higher audit fees).
Total tax fees declined by 0.8 percent in 2021, reaching their lowest level since 2011, while audit costs rose by 2.9 percent, audit-related fees by 10.2 percent, and other fees by 3.0 percent.
After falling by more than 7 percent between 2019 and 2020, the average audit fee climbed by almost 1.6 percent to $2.2 million in 2021. The Covid-19 epidemic had a negative influence on audit work in 2020, and there were more audits of special purpose acquisition companies (SPACs), which had audit fees that were relatively lower than those of other publicly traded corporations. Since the Sarbanes-Oxley Act's introduction, there has been a pattern of rising average audit fees for both American and international corporations, with the exception of 2020. The 2021 average stayed lower than the averages in 2018 and 2019.
In 2021, audit fees per million dollars of sales fell to $594 as revenues recovered to their pre-pandemic levels. The survey discovered that for both American and international businesses, revenues grew more quickly than overall audit fees. The 2020 change in the SEC's definition of accelerated filers, which resulted in hundreds of companies having their filing status changed to non-accelerated filer and no longer being required to obtain audits of their internal controls, had an impact on historical trends in fees per dollar of revenue statistics.
In 2021, non-audit fees as a share of total fees decreased for the seventh year in a row, hitting a low of 8.9 percent. This ratio can be used to evaluate how audit firms adhere to the standards for independence when offering non-audit services to its customers that are publicly traded companies. The study ascribed the decreases to authorities' ongoing efforts to protect auditor independence on a worldwide scale by limiting certain non-audit activities and stepping up reporting and monitoring to assure compliance.
The percentage of overall fees attributable to non-audit fees was between 10 and 12 percent from 2005 to 19 but reached as high as 36 percent in 2002.
According to the research, the Big Four firms will hold a market share of more than 90% of public company audits in 2021 based on audit fees. PwC is in first place with 29% of the market, followed by EY (26%), Deloitte (21%), and KPMG (17 percent).
By fLEXI tEAM