HSBC tops audit fee list

HSBC had the biggest audit fee in the FTSE-100 for the second year running, according to the fifth annual survey by Financial Director magazine. The bank’s fees to KPMG leapt from £12.3m to £17.2m. Significantly, Shell T&T has published its audit fee for the first time in three years, revealing that it paid £11.3m to KPMG and PwC. The average audit fee for a FTSE-100 company is now £2.21m, up 17% from £1.89m in the previous year’s survey. Several factors explain this but the most important is the recent spate of mergers. The coming together of groups such as Royal Bank of Scotland/NatWest, Barclays/Woolwich and BP/Arco, alongside the creation of GlaxoSmithKline, BHP Billiton and HBOS, have created much larger corporations with audit fees to match. For companies that have much the same look and feel as they had at the time of the previous survey in December 2000, audit fees have hardly risen. Calculating the audit fee as a rate per £1m turnover suggests that audit fees rose about 3.5%, to £466. Supermarkets dominate the cheap end of the table using this ‘value for money’ metric, while asset-based low-turnover businesses such as 3i, Canary Wharf and British Land bring up the rear. Industry sectors tend to group together, as demonstrated by the pairings BT (£123) and Vodafone (£125); Rio Tinto (£410) and BHP Billiton (£419); and Barclays (£278) and Abbey National (£260). Non-audit fees continue to soar, with a 37% increase to £675m paid to group auditors for services such as tax advice, mergers, acquisitions and disposals due diligence and ancillary regulatory audit and compliance services. The survey also reveals that the relentless grind towards ever faster audit sign-offs continues. This year, the Big Five have knocked another day off of FTSE-100 audit times, measuring from the year end to the date on the audit certificate. The average is now 60 days, while six companies get the books ticked in fewer than 40 days. BSkyB has squeezed another day out of the schedule, getting Arthur Andersen to sign off the accounts in just 24 days, making it the fastest sign-off in the FTSE-100. Advertising group WPP still takes four months to get its sign-off, while BP does a positively speedy 44 days, compared with Shell’s 74. Reckitt Benckiser knocked more than a fortnight off its audit time to a better than average 59 days. Ernst & Young is still the fastest auditor – or, if you prefer, the auditor whose clients have the most organised finance functions. – The full survey appears in the January edition of Financial Director.