UK companies pay £1bn in total fees to their auditors
The UK’s largest companies have paid more in fees this year than last, despite the audit market becoming more competitive.
Total fees paid out to the six firms that carry out audits for FTSE 350 companies broke through the £1bn barrier in the last financial year, according to data compiled from the companies’ 2014/15 annual reports.
The six major accountancy players - the Big 4 of PwC, KPMG, Deloitte, and EY, as well as BDO and Grant Thornton - received an estimated £685m in audit fees, compared to £694m the previous year. Audit-related fees also fell, dropping to £93.2m from £112.8m.
However, there was an 8.1% rise from £978m in cumulative fees supported by non-audit work, including merger and listing activities.
Deloitte's UK audit managing partner, Panos Kakoullis, explained that work on M&A deals and IPOs has increased due to a “buoyant economy”, but went on to warn that non-audit work will drop off under new rules preventing the provision of a wide range of non-audit services.
New EU regulations
Kakoullis said that “the trend has been to move away from big IT consultancy and tax work”, but new EU regulations being transposed to the UK by the Financial Reporting Council may create a ‘black list’. This will prevent the provision of certain non-audit services by auditors of public interest entities.
The new rules about audit tendering now require companies to tender their audit contracts once every ten years, and Kakoullis said the changes have led to “ferocious competition.”
“Some people talk about this being a once-in-a-generation event but that’s not correct. This has never happened before; it’s the first time we have had to contend with anything like this,” he said.