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Median Audit Fees Rose 3.4 Percent in 2014

U.S. companies said their audit fees rose in 2014, according to a survey from Financial Executives International. The findings lend some credence to recent complaints that the focus in PCAOB inspections on internal control weaknesses is behind the rise, but the survey results cite other causes for contributing to the increase.

U.S. companies reported a 3.4 percent increase in median audit fees in 2014, according to an annual survey from Financial Executives International (FEI) released on October 8, 2015.

The report examines the fees paid to external auditors in 2014 and several additional services related to the auditing process, based on responses from 220 financial executives, FEI said.The report also examined audit fees reported by 7,000 companies registered with the SEC.

FEI said the 20.6 percent of companies with weak internal controls had the greatest increase in costs, with their fees jumping a median of 6.4 percent.Some 45 percent of companies saw no increase in fees at all.

Business groups, in particular the U.S. Chamber of Commerce, have said the PCAOB’s focus in its inspections on internal control weaknesses caused a surge in audit fees during the past several years.The FEI survey, while it found a correlation between internal control weaknesses and higher fees, also found that other factors played a part.

About 30 percent of survey respondents said the increase was also due to regulatory changes, such as the transition to the 2013 version of the Internal Control—Integrated Framework from the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

About 19 percent said the increase can at least partly be traced to company growth and larger financial reporting staffs.Another 11 percent said acquisitions of other businesses had a hand in the increase.

FEI said the companies that had to spend more money on compliance with Section 404 of the Sarbanes-Oxley Act of 2002 — once they incurred the costs to fix the issue — reported an improvement in their internal controls and called the extra expense worthwhile.