March to May of each year is a busy time for those of us who track professional fees paid to auditors, as disclosed on public companies’s annual proxy statements. Beginning in February 2001, each US public company has been required to directly disclose to its shareholders how much is paid to the company’s independent auditors. The SEC requires companies to disclose total fees broken down into four categories: audit, audit-related, tax, and “all other fees.”
Thus far in 2006, the ARGI staff has processed more than 4,300 proxy filings, plus another nearly 400 20F filings made by foreign companies. After analyzing data from our database of 2006 filings, we find that total fees paid to auditors dropped overall when comparing Fiscal 2005 total fees to Fiscal 2004 total fees.
Among the Big Four, PricewaterhouseCoopers had the largest drop of 5.9%. Deloitte’s and KPMG’s total fees both dropped 3.1%. Ernst & Young gained just .2% in Fiscal 2005, but still stands out as the only Big Four firm without a loss. Remarkably, non-Big Four firms dropped as well, taken on the whole, by 3.3%.
Looking at the data from another direction, companies with $1 billion or more in revenue spent 4.7% less in 2005 versus 2004, while spending at companies with less than $250 million in revenue increaseing spending by 6.1%.
For this analysis, ARGI included US public companies with a fiscal year end of after 11/1/2005. Data comes from DEF-14A proxy statements. Excluded from this group are companies with a different auditor between FY 2005 and 2004 and those where fiscal-year transition periods are included or where some other substantial ambiguity exists in the fees disclosure. The final population included more than 3500 companies. FY2004 fees total were as restated for FY2005, not as originally filed. For more information on ARGI’s audit fees database, please contact your firms national competitive intelligence unit.