Sarbox pushes up Big Four fees

Audit fees from Big Four firms have increased, substantially for some
clients, but largely as a result of performing vastly increased volumes of
client work.

This admission came after mid-tier firm BDO Stoy Hayward published research
claiming audit costs for Big Four clients had risen 30% as a result of US
legislation in the Sarbanes-Oxley Act.

The study also indicated that consultancy clients were fleeing the Big Four
firms, by highlighting declining consultancy fees.

The audit and consultancy claims were viewed by the Big Four as part of a
publicity campaign from BDO, because of declining consultancy fees, to convince
potential clients that the firm can take on big projects and compete with the
largest firms.

Glyn Barker, head of assurance at PricewaterhouseCoopers, said: ‘Audit fees
have increased significantly. For US-registrant companies, that’s because of
extra controls work. But for many other UK companies, we are finding that they
are asking for more work because they want more comfort in their financial

He added that clients recognise that if an auditor has to perform more work,
it will cost more.

Barker denied emphatically that the rise in fees paid for audit resulted from
a rate card increase and laid the blame firmly at the door of Sarbox.

UK companies face implementing Sarbox from July next year, but US businesses
are already paying for extra work to see them through the new legislation.

According to Finance Executive International, a US research group,
implementation of section 404 of Sarbox increased regulatory costs by an average
of 39%.

Michael Hughes, chairman of KPMG’s UK audit practice, expects costs next year
to be at roughly the same level as those incurred in the US.

In the latest Accountancy Age Top 50 survey, PwC posted revenues
from audit services of £725m for 2004. For the same year, KPMG took £306m. Up to
date figures show Deloitte received £410m for the year to May 2005 and Ernst
& Young took £371m.

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