Nonaudit services dropping

While audit and audit-related fees are on the rise, auditors are performing fewer nonaudit services for clients. While these findings suggest auditors are losing revenue, our article “Largest employers part III” in October showed that they are more than compensated for these losses by the rise in audit fees. Also, many of the services they once provided are likely still being provided by CA firms, just not by a company’s auditor.

An analysis of the nonaudit fees of 675 of Canada’s largest public companies, all included in the Report on Business 1,000, shows the average fee paid for nonaudit services in 2005 dropped by $38,000 to $236,000. Non-audit fees now account for only 21% of the total paid to auditors with the bulk of this (14%) made up of payment for taxation services.

The percentage of total fees paid for non-audit services is also down. In 2004, the same 675 companies accounted for 24% of fees paid to auditors. In an analysis of 106 of these companies in 2003, the nonaudit fees accounted for 29% of the total paid.

Nonaudit fees accounted for a lower percentage of total audit fees for the largest companies in the study. The nonaudit fees of the 127 companies that had revenues of at least $1 billion were only 17% of total fees paid compared with 22% for firms with revenues less than $1 billion.

John Tabone is CICA's manager of innovation