Audit Fees for FTSE 100 Companies Hit £911m
Fees for audit services at FTSE 100 companies reached a new high, totaling to £911m in 2019 compared to £892m in 2018. This increase in audit fees is mainly due to pressure exerted on firms by regulators and clients to invest more time and resources on core auditing activities.
HSBC Holdings paid £76m as audit fees which is the biggest fee paid by any firm for audit services in the UK. On the other hand JD paid Sports saw the largest increase in fees for audit services, up by 89 per cent to £1.7m, as per study by Thomson Reuters.
The fees for non-audit services paid by FTSE 100 firms to their auditors dropped by 12 per cent from last year to £94m in 2019, as audit firms are seeking towards reducing cross-selling to external audit clients.
The Financial Reporting Council (FRC) has been encouraging audit firms to increase their remuneration as well as invest more resources into core audit activities, in a bid to improve the quality of audits. The regulating body has also called for the audit practices to be separated within the Big Four firms, which is expected to result in further increase in fees for audit services as regulators and audit firms are seeking to transform audit practices into self-supporting business units.
The regulator has placed a limit on fees related with non-audit services so that to force audit firms to devote most of their resources into core audit activities.
The chief operating officer of customer markets at Thomson Reuters, Brian Peccarelli, said that audit firms have reacted to the pressure by regulators by making investments in latest technologies to make sure that the quality of external audits are up to the required standard.
He further said that rising fees for audit services demonstrate that companies clearly believe in paying extra money for quality audit work.
The separation of audit practices within Big Four firms is going to help in accelerating the adoption of latest audit technology as audit firms are looking towards lowering their cost whilst improving their performance.