UK firms see audit costs climb as fines and skills shortage push up auditors fees
The total amount in audit fees paid by the UK’s largest 500 companies has risen by 14 per cent in the past year, according to new data.
The value of audit fees paid by these firms rose from £1.12bn to £1.27bn for the 2021/22 financial year, according to new research by Thomson Reuters.
It said that the increase in the cost of audit work was being driven by the growing regulatory pressure to improve the robustness of audits and skills shortages.
Last year, the country’s audit regulator, the Financial Reporting Council, issued fines totalling £33.3m, up 77 per cent on the previous year.
“Auditors have invested heavily in recent years into delivering high quality audits. This has inevitably put upward pressure on audit fees,” Kyle Gibbons, managing director for Europe at Confirmation, a Thomson Reuters firm, said.
Commenting on the findings, Kathryn Cearns, former chair of the Office for Tax Simplification, said: “There is a lot of focus on audit quality and that’s putting pressure on auditors to up their game.”
“There is also a scarcity of talent, which is putting pressure on audit fees,” she added.
To attract new recruits and retain existing staff, the Big Four accounting firms – EY, PwC, KPMG, and Deloitte – were forced to increase salaries across the board last year.
However, that sector pay battle has eased over the course of the year as the national and global economic outlook remains uncertain.
PwC told its 25,000 staff in the UK in June to expect smaller bonuses and pay rises this year, with Ian Elliott, the firm’s chief people officer, reportedly writing to staff that the “exceptional” pay rises handed out last year would not be repeated.
Similarly, KPMG said in May that bonuses would be slashed as its profits falter amid a slowdown in the dealmaking environment this year.