The Average Audit Fee Reached an All-Time High in 2022

In 2022, the average audit fees for an SEC-registered public companies increased 11 percent over 2021 and hit an all-time high of $2.24 million. That is the headline finding of 20-Year Review of Audit Fee Trends 2003-2022, Ideagen Audit Analytics’ (AA) annual analysis of fees paid to external auditors. Last year, AA reported that 2021 audits fees had increased over the prior year, but not to record levels. See AA’s 20-Year Review Finds Audit Fees are Rising Again, September-October 2022 Update. For S&P 500 companies, the average audit fee was $10.78 million, a record high for the S&P 500 and a 3 percent increase from FY2021. See Audit Fee Trends of S&P 500 (an AA blog post which breaks out the findings of the annual study for the S&P 500).

Highlights of AA’s report and blog post include:

• Total audit fees increased.

Total audit fees paid by SEC registered public companies (domestic and foreign) were $16.8 billion in FY 2022, an increase of 0.6 percent over FY2021. Total audit fees paid by U.S. companies (i.e., excluding foreign registrants) in 2022 rose to $12.36 billion, up 0.7 percent from 2021. For the S&P 500, total audit fees reached an all-time high of $5.38 billion.

Total audit fees increased despite a 9 percent decline in the number of reporting companies (from 7,963 in FY2021 to 7,279 in FY 2022. The drop in companies was largely the result of changes in the SPAC market. SPAC IPOs fell 86 percent between 2021 and 2022, and 35 percent of SPACs that reported fees in FY2021 did not file in FY2022.

• Total fees paid to auditors fell.

Although total audit fees rose, the total fees of all types that SEC registrants paid to their auditor decreased slightly. (Total fees include audit fees, audit-related fees, fees for tax services and fees for other services.) Total FY 2022 fees were $20.2 billion, a decrease of less than 1 percent from FY2021. AA states that the decrease in total fees aligns with the decrease in the reporting company population in FY2022. Each category of non-audit fee saw a decrease from FY2021. Audit related fees decreased 8 percent, tax fees decreased 4 percent, and other fees decreased 15 percent.

• The average audit fee and the average total payment to the auditor both increased.

As noted above, the average audit fee increased 11 percent from FY2022, reaching an all-time high of $2.24 million per SEC registrant. Average audit-related fees and average tax fees increased by 2 percent and 7 percent, respectively, while the average of other fees decreased by 6 percent in FY2022. Overall, average total fees paid grew 10 percent to $2,702,922, a 20-year record.

• Audit fees per $1 million of company revenue fell.

Audit fees as a percentage of client revenue were $576 per $1 million of revenue in FY2022, a 6 percent decrease from FY2021 and a nine-year low. Although both audit fees and audit client revenue increased in FY2022, client revenue grew faster – revenue rose 8 percent from FY2021, compared to audit fee growth of only 0.6 percent. For the S&P 500, revenue increased 12 percent in FY2022, while audit fees paid rose by only 4 percent, resulting in audit fees per $1 million dollars of revenue dropping to $343.

For U.S.-based companies, the average was $583 in audit fees per $1 million of revenue, down 8 percent from FY2021, while foreign SEC filers experienced a 2 percent decrease to $558 per $1 million of revenue. AA points out that SEC-registered foreign companies are, on average, larger than U.S.-based public companies and that the PCAOB’s focus on audits performed by non-U.S. accounting firms may be affecting foreign company audit fees.

EisnerAmper had the highest audit fees per million dollars of client revenue, at $16,595; by comparison, PwC’s audit fees averaged $616 per million of client revenue. (The difference in fee per million in client revenue is presumably a function of difference in average client size.)

• The average audit fee rose for larger companies but fell for smaller.

In FY 2022, average audit fees increased 7 percent (to $5.27 million) for large accelerated filers, the biggest public companies. For the next size tier, accelerated filers, average audit fees paid increased by a stunning 33 percent in FY 2022 to $1,453,905. However, the smallest public companies, non-accelerated filers, experienced a modest decrease in average audit fees paid. In FY2022, the average non-accelerated audit fee was $616,706, down 1 percent from FY2021.

• The large firms dominate SEC filer auditing.

The four largest accounting firms earned 92 percent of audit fees paid by SEC registrants in FY2022. PwC led with 28 percent of total audit fees ($4.66 billion). EY had a 25 percent share of total audit fees ($4,27 million), followed by DT at 23 percent ($3.81 billion), and KPMG at 16 percent ($2.74 billion).

Six firms audited the S&P 500 -- the four firms listed above, plus Grant Thornton and BDO. PwC had a 35.7 percent share of total S&P 500 audit fees.

• There was little change in the industries with the highest and lowest average fees and fees per $1 million of revenue.

The 2022 highest average audit fees were in Transportation ($3.016 million) and Finance ($2.676 million). The industries with the lowest average audit fees were Agriculture ($1.322 million) and Mining ($1.513 million). These same industries were at the top and bottom of the 2021 average fee list.

The industries with the highest audit fees per $1 million dollars of revenue in 2022 were Agriculture ($1,290 per million) and Finance ($1,016 per million). The industries with the lowest fees per $1 million dollars of revenue were Retail Trade ($168) and Wholesale Trade ($225).

Comment: Audit committees may find it useful to compare changes in their company’s fees with the information in the AA report. AA points out in the Introduction to its 2022 report that “[a]udit fees paid to external auditors can be an indicator of audit complexity. Analyzing fees provides further insights into audit risk and auditor independence.”

Committees might also want to focus on how their non-audit fees compare to the broad metrics. As noted above, AA found that non-audit fees declined in 2022. AA observes that “much discussion has centered around the effect that significant non-audit services have on external auditors' level of independence” and that many countries (including the U.S.) restrict the type of non-audit services allowed or the amount auditors can be paid for non-audit services. Beyond regulatory restrictions, many audit committees limited their company’s use of the financial statement auditor for non-audit services to avoid questions about the possible impact of such services on auditor objectivity.