FTSE 100 audit fees hit £911m

Audit fees at FTSE 100 companies have reached a new high, totalling £911m in 2019, up from £892m the previous year, in response to pressure from regulators for firms and their clients to invest more in core auditing activity

HSBC Holdings paid the biggest audit fees at £76m, while JD Sports posted the biggest increase in audit fees, up 89% to £1.7m, according to the Thomson Reuters study.

The value of non-audit fees paid by FTSE 100 companies to their audit firm dropped 12% last year, from £107m in 2018 to £94m in 2019, as audit firms sought to reduce cross-selling to audit clients.

The Financial Reporting Council (FRC) has been urging audit firms to raise prices and invest more time and money into core audit work, in a bid to drive up quality standards. The regulator has also called for the separation of audit practices, within the Big Four, which is expected to add to upward pressure on audit fees as audit practices seek to become self-supporting business units.

The regulator has placed a cap on non-audit fees to force auditors to devote greater resources into core audit work and reduce the perception of possible conflicts of interest.

Brian Peccarelli, chief operating officer, customer markets at Thomson Reuters, said: ‘Audit firms have responded to regulatory pressure by making substantial investments in new technologies to ensure that audits are carried out to the highest standard.

‘Rising audit fees show that FTSE 100 companies and their shareholders clearly believe it’s worth paying extra for quality work.

‘The separation of Big Four audit practices is going to accelerate that adoption of audit technology as firms look to lower their cost base whilst improving performance.

‘However, a natural desire by corporates to reduce their costs during the current coronavirus economic slowdown may create a challenge to deliver higher quality audits without fees rising too quickly.’

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