Audit fees edged up from 2020 to 2021

Average audit fees rose a slight 2.5% from $2,600,677 in 2020 to $2,666,659 in 2021, reflecting increased demands on auditors during the pandemic, according to a study released Monday. 

The study, from Financial Executives International's Financial Education & Research Foundation, was released during FEI's Corporate Financial Reporting Insights Conference in New York. It found that a little more than half (53%) of the financial executives and audit engagement partners polled cited the expanded scope of the audit as the main reason for the increase in fees. Audit management and audit team efforts also grew, with increased fees, scope and effort driven by different factors, including acquisitions, organizational structure changes, and changes to internal controls over financial reporting. Other factors driving audit fees included the number of companies going public, either through SPACs or IPOs. 

Technology is also making a big impact on auditing, with 49% of public company respondents saying the use of data analytics and emerging technologies improved the quality of their audits, according to the FERF study, which was sponsored by the Center for Audit Quality. Many audit teams have started employing innovative data analytics and tools to support their risk assessment procedures; to increase audit procedure precision; and to introduce more unpredictability into testing.

"Year over year, we continue to see public companies and their external auditors flex with the constant changes our business environments experience," said Andrej Suskavcevic, president and CEO of Financial Executives International and the Financial Education & Research Foundation, in a statement. "The past year delivered an influx of organizational change due to newer work models as well as M&As among other factors. However, it seems the audit function has been able to stay the course with minimal external cost increases on average. This suggests that perhaps the intensity of the challenges they face may be lessening or, at least, reverting to more traditional issues as opposed to new and unknown ones such as those caused by the pandemic."

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According to interviews conducted for the study, experiences varied when it comes to the deployment of new audit technologies. "There is an opportunity for preparers and auditors to have in-depth discussions about how technology is being used to improve the audit quality and enhance user experience in a way that is tailored to the company under audit," said the report.

In addition to audit fees and technology, the report also discusses observations and lessons learned from financial reporting and auditing in the hybrid environment, the landscape of ESG reporting and assurance, and the factors that may affect the audit marketplace in the future.