Record High Average Audit Fees Paid by SEC Registrants in FY2022, Study Finds

In a recent annual study conducted by Ideagen Audit Analytics, it was revealed that Securities and Exchange Commission (SEC) registrants paid record-high average audit fees in fiscal year 2022.

The study, which reviewed audit fee trends over a 20-year period, highlighted an 11 percent increase in average audit fees from FY2021, with each SEC registrant paying an average of $2.24 million for auditing services. The report attributed this surge to factors such as inflationary pressures, a competitive labor market, and heightened risk and regulatory requirements.

While audit fees on average per million dollars of revenue witnessed a 6 percent decrease from FY2021, reaching their lowest point since FY2014, this decline was counterbalanced by robust revenue growth that outpaced fee hikes.

The study also illuminated other noteworthy findings:

1. Total Fees Growth: Average total fees, encompassing audit, audit-related, and tax services, exhibited a substantial uptick of nearly 10 percent in FY2022, exceeding $2.7 million. This figure represents the highest amount recorded in the 20-year analysis, surpassing the previous peak of $2.6 million in 2019.

2. U.S. Audit Fee Surge: FY2022 witnessed a notable 12 percent escalation in average U.S. audit fees, marking the most significant increase since the enactment of the Sarbanes-Oxley Act in 2002.

3. Foreign Filers and Fees: Despite foreign audit fees reaching $2.9 million in FY2022, there was an 8 percent reduction in the number of foreign filers compared to FY2021.

4. Dominance of the Big Four: The study underscored the continued dominance of the Big Four accounting firms in the audit fee market, constituting 92 percent of all audit fees paid by SEC registrants in FY2022. PwC emerged as the market leader with a 28 percent share, followed by EY (25 percent), Deloitte (23 percent), and KPMG (16 percent).

The study's director commented on the evolving landscape of audit fees, highlighting recent changes such as the SEC's revised definitions for accelerated and large accelerated filers in 2020 and the surge of special purpose acquisition companies (SPACs) in 2021. Notably, the number of companies disclosing audit fees decreased from 7,963 in the prior year to 7,279 in FY2022.

As audit fees continue to undergo dynamic shifts influenced by a range of factors, this study provides insights into the evolving dynamics of the audit industry and its financial implications for SEC registrants.

By fLEXI tEAM