FDs and senior partners in the profession are warning that fees could rocket because of increased insurance premiums, predicted to rise by 50% or even double in the near future, and the fear of huge lawsuits like the one affecting Andersen in the wake of Enron.
The news comes as FDs demonstrated their reluctance to pay for more audit. In a poll 70% of FDs said they would not want increased fees for better audits. Some even complained that audits ‘are a complete waste of time’.
In the profession there is growing awareness of rising prices. Rodger Hughes, head of assurance and business advisory services at PricewaterhouseCoopers, said: ‘There are signs already that people are thinking about risks incurred when pricing audits. Directionally I think the general expectation is it will increase.’
Auditors will also have to bear the brunt of a hike in insurance premiums, said Hughes.
Bill Durston, group FD at Marshalls of Cambridge and a former audit partner with Ernst & Young, estimated that fees could rise by as much as 50%. ‘Plcs are going to come in for a shock,’ he said.
Competition minister Melanie Johnson appeared unconcerned by predictions of price rises at this week’s ICAEW annual conference, saying she thought there was ‘still competition in the market’.
However, Deloitte & Touche said it had dealt with requests for additional assurance work to be attached to audits which is resulting in higher fees.
Over recent years audit costs has been falling. Some observers blame lowballing – cutting audit prices to win more lucrative consultancy work.Colin Reeves, head of the Foundation’s Review Board, said that is was ‘quality of audit that concerned the regulator’.
The Review Board this week began an attitudinal survey of auditors, audit clients and institutional investors to determine the state of audit in the UK. The survey is a precursor to another review of audit pricing and quality.
UK senior partner Phil Verity has been elected for a second term at Mazars
An audit partner has been appointed at Grant Thornton in its North West offices
KPMG has been appointed with “immediate” effect as the auditor of Dorcaster
The audit for Ibstock will be taken over by Deloitte following a competitive tender process