Audit fees up in 2005

A fee analysis at 675 of Canada’s largest public companies in the Report on Business 1,000 ranking shows audit and audit-related fees for most are on the rise.

The fees were up on average 40% from 2004 to 2005, and the median increase was 15%. In total, 465 companies (69%) saw an increase of at least 2% and 173 (26%) had their fees decreased by at least 2%. The fees for the remaining 37 companies (5%) were about the same in 2005 as in 2004.

Smaller public companies faced the largest increases in terms of percentage change. Firms with less than million in revenue had an average increase of 65% compared with 23% for firms with greater than $500 million. The increase in actual dollars, however, was much greater for larger companies. Those with $500 million or more in revenue had an average increase of $268,378, compared with $26,642 for those with less than $20 million.

The analysis also suggests that there are economies of scale related to audit fees. The 2004 fees of firms with more than $500 million in revenue were only 0.1%; this amount rises as companies get smaller.

While some of the smallest companies are paying a significant portion of their revenue to their auditor, it should be noted that many in this category are research (pharmaceutical/new technology) and exploration(minerals/oil and gas) companies that do not generate regular revenue streams.

John Tabone is CICA's manager of innovation