November 18, 2015
Audit Fee Survey: SOX 404 Continues to Increase Costs
FERF recently released this Audit Fee Report that reveals audit fee information for 7,000 SEC filers over the past four years, in addition to information gleaned from over 220 survey responses including 76 public companies, 92 private companies and 57 nonprofit organizations.
Key public company survey findings include:
- Median audit fee of $2.2 million for 2014 audits, representing a median increase of 3.1% over their prior year’s audit fees
- Reasons for the increase reportedly were primarily due to acquisitions and review of manual controls resulting from PCAOB inspections. Other bases for increases included inflation, the new COSO framework, and changes in organization structure.
- Number of audit hours required for audit: median of 6,720 (34 responses)
- Average and median audit fees for companies that have centralized finance operations are significantly less than those that have decentralized finance operations
- About 86.8% of companies use a Big 4 auditor—with PwC auditing 22 of the total 76
- Majority of companies indicated that the volume of annual audit work by external auditors in 2014 increased compared to 2013 to obtain both an auditor’s report on the financial statements (69.3%) and an auditor’s report on ICFR (63.2%).
- 67.6% of companies have adopted the 2013 COSO Framework. Others indicated that they will adopt the new Framework by 2015 year-end at the latest.
- Over half of respondents indicated an increase in internal cost of compliance with SOX 404 within the past three years. However, about half indicated that they have better internal controls and that the additional expense was worthwhile.
- 45.3% and 66.7% of respondents, respectively, indicated that their auditors requested that they make changes to their controls or controls documentation as a result of PCAOB requirements or inspection feedback.
- None of the respondents indicated that the PCAOB findings resulted in a restatement of their financial statements, nor did it result in a change in their auditor’s opinion.
We have heaps of additional resources in our “Audit Fees” Practice Area.
SASB Launches Sustainability Accounting Credential
The SASB just launched a new credential – the “Fundamentals of Sustainability Accounting” – aimed at financial reporting professionals, sustainability professionals, investors, consultants and securities lawyers involved in evaluating sustainability issues that impact a company’s financial performance. The credential entails two exams designed to test expertise in the materiality of sustainability information for corporate strategy and investment analysis.
The first exam – Level 1 – focuses on principles and emerging practices. The second exam – Level II (currently under development) – will focus on application and analysis:
- Learn how sustainability factors impact financial performance
- Understand the legal context for material sustainability information
- Gain a common language to describe the materiality of sustainability information to finance, legal, and accounting professionals
- Learn how industry-specific sustainability information can inform corporate strategies or investor recommendations
- Gain the skills needed to evaluate corporate performance on sustainability factors
For more information, see this infographic snapshot about the credential, and these FAQs. See also this Corporate Counsel memo.
Podcast: New SEC Enforcement Database
In this podcast, NYU’s Dr. Stephen Choi discusses the recently launched Cornerstone Research/NYU Securities Enforcement Empirical Database, or SEED, including:
– Can you provide an example of what kinds of insights someone can gain from using SEED?
– What makes it so difficult to get the same data directly from the SEC?
– How did the idea of SEED come about?
– What can we learn from SEED that would be relevant to the debate about the SEC’s so-called “home field advantage” in its administrative proceedings?
– What are your plans for SEED going forward?
– by Randi Val Morrison