The trend is part of a market-driven solution to the current crisis of confidence in corporate governance.
The lion’s share of finance directors are probably not unhappy about the current situation. In the past, the audit has always provided a budget-strapped FD with an easy option for saving money. Many a tender has been issued on that basis.
In the past, audit firms have tacitly acknowledged that they compete on price, though, of course, they would never low ball.
Now many firms are winning tenders by raising prices, and that would not have happened 18 months ago.
It’s not a bad thing either. Audit committees, which in the past would undoubtedly have questioned a rise in audit costs, are now asking whether companies should in fact be paying more – even after new Sarbanes-Oxley-related costs have been factored in.
It’s a great pity, however, that it took an event as momentous as the collapse of a Big Five firm to break the downward spiral.
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