The regulatory drive to improve the accuracy of audited results, and severe penalties for failure to do so, are pushing up audit costs considerably.
In the US the Sarbanes-Oxley Act sets out a range of new responsibilities for boards of directors and threatens senior executives with hefty penalties, including prison sentences, if they fail to meet them. It has spurred executives into action - the first port of call being their auditing advisers.
The impact on audit fees has been immediate. A study by US law firm Foley & Lardner shows compliance costs rose 90% last year. These cover public relations, insurance, and legal and directors' fees.
Fees are rising in SA, too, but not as sharply as in the US. "It's inevitable that fees will go up, given the proposed new regulations under discussion," says SA Institute of Chartered Accountants executive president Ignatius Sehoole.
The fee income of the top five firms rose by over 20% to a total of R4,7bn in the latest reporting period (12 months to mid-2002).
PricewaterhouseCoopers partner Malcolm Dunn expects them to rise by a further 10%-15% in the 2002/2003 financial years. "Boards of directors expect far more work in terms of time spent on checking accounts and the quality of the audit," he says.
Deloitte & Touche CE Vassi Naidoo says auditors may be getting higher fees, but they also face increasing IT, indemnity insurance and salary costs. "The profession is competitive and we are struggling to get fee increases greater than 12%," he says.
