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Audits are getting more expensive—and forthcoming standards could make them even more costly in the coming years, according to new data from the Financial Education & Research Foundation (FERF), the nonprofit research arm of Financial Executives International (FEI).
The average audit fee jumped 6.4% in 2023, to $3 million, while the median hit nearly $1.4 million, a 7% increase, according to FERF, which published its 15th annual look at audit fees in December.
Where’s the money going? This is a “select multiple options” situation. Apart from inflation (because of course inflation), fees are rising because auditors worked harder to finish engagements in the year ending May 2024, according to FERF. The most common reason for the extra effort was changes to internal controls over financial reporting, which 43% of the audit clients surveyed cited. Tied for second place at 29% were turnover at audit firms and changes at companies including staff turnover, restructuring, and mergers and acquisitions. Nearly three in four respondents (72%) also said their 2023 IT audit took more work than the year before, compared to 53% in 2022.
Keep that wallet open. New regulations may also keep driving up audit fees, Andrej Suskavcevic, head of FEI and FERF, said in a press release. After a “couple of years of relative calm in the financial reporting ecosystem,” he said, “we expect to see further increases in audit fees as notable changes to financial reporting unfold.” The Financial Accounting Standards Board (FASB)’s standard for Disaggregation of Income Statement Expenses, which starts to take effect in late 2026, “represents a potentially large burden to implement and audit,” Suskavcevic said. Auditors will also be hit with “with several new PCAOB standards in the next several years.”
Ideas for $aving. Unless they can all hire a certain mother-in-law—who held off inflation with grocery coupons like she was Gerard Butler in 300—there’s only so much companies can do to offset macro headwinds and ever more complex audits. Nearly nine in 10 respondents at public companies (88%) said they’d negotiated with auditors. Looking inward, 65% reviewed what they had their auditors focus on, while an equal share sought to improve internal controls and documentation. Preparing better for audits was the top strategy at private companies (61%), while 57% of respondents working for private companies negotiated with auditors, and 38% reviewed what their auditors prioritized.