The Big Four have enjoyed a whopping 22% boost to their audit revenues from FTSE 100 companies. That is the finding of our latest survey of fees earned by accountancy firms - all members of the Big Four - from FTSE 100 audit clients. Ironically, it is WorldCom, Enron and the other US scandals - initially so damaging to the accountancy profession's reputation - and the resulting increase in regulatory demands that have largely paved the way for this audit fee boom, from £263m last year (£269m if the same constituents as this year are considered), to £321m.

There are three main reasons for this audit fee bonanza. 2005 is, of course, the year when listed companies are required by the European Union to implement International Financial Reporting Standards (IFRS), but at the same time companies with listings in the US are also struggling with the new internal control demands of Sarbanes-Oxley (Sarbox).

In addition, with a nervous eye on the parade of US company executives who have found themselves facing criminal charges and going to jail - WorldCom chief Bernie Ebbers, featured on our cover, has just been sentenced to 25 years - company directors in the UK are taking audit more seriously.

And the same goes for audit partners at the firms.

Even without Sarbox and IFRS, audits are likely to have become more thorough and more expensive. The result is an audit fee bonanza for UK accounting firms.

Non-audit fees fall

Meanwhile, this year's survey shows a continuing downward trend in fees earned by auditors for non-audit services. In last year's survey 57% of total fees earned came from services other than the statutory audit - this year the figure is just 49%. But back in 2003, 65% of the total fees earned by firms from their FTSE 100 audit clients came from non-audit services. The major reason for the recent decrease in non-audit fees is also the cause of the significant jump in audit fees - increased regulation in the post-Enron era. Therefore, for the first time in decades, auditors are earning more in audit than non-audit fees from their FTSE 100 clients.

Corporate governance standards that require companies to monitor and assess the independence of their auditor are one of the main reasons behind the fall in non-audit fees earned by the Big Four in recent years. One shouldn't feel too sorry for the firms, however. Although it is difficult to measure, it is clear that there has been something of a merry-go-round of non-audit assignments, with each firm picking up work that its rivals have been forced to ditch or have been unable to bid for.

Disclosure

Fortunately for their auditors, work on IFRS and Sarbox tends to fall in the domain of the audit fee, or at least be classified as audit-related, so there is little danger of falling foul of the audit committee. Most of the FTSE 100 companies classify any extra fees earned as a result of IFRS or Sarbox advice as part of the statutory audit fee, although a significant number describe it as 'audit-related'. In either case, many provide some details of the extra costs. For example:

•    Cable & Wireless says in its accounts that £1m of the audit-related fees paid to KPMG relate to IFRS advice.

•    Centrica's audit-related fees of £1.5m 'substantially relate' to IFRS advice.

•    GlaxoSmithKline saw its audit-related fees increase from £2.6m in 2003 to £3.4m in 2004, mainly due to IFRS and Sarbox advice.

•    HSBC Holdings paid $4.1m to its auditor, KPMG, for Sarbox advice and, according to the accounts, a further $6.6m to other firms.

•    Hanson's audit fee to Ernst & Young of £4.4m includes £1.6m for 'Sarbox attestation fees'.

•    Legal & General paid £3.2m to Pricewater-houseCoopers during 2004, compared with £1.9m in 2003 which, it says, 'mainly reflects additional work necessary as a result of the planned adoption of IFRS' and the extension of its auditor's reporting responsibilities on life and pension returns.

•    Man Group paid £7.3m to PwC, mainly for IFRS and Sarbox advice.

•    O2 says specifically that Sarbox compliance cost £279,000 in fees and IFRS compliance £150,000.

•    Prudential's audit-related fees included £1.8m for Sarbox advice.

•    Rexam's IFRS project has cost it £1.2m in fees so far.

•    WPP's audit-related fees paid to Deloitte rose from £0.4m in 2003 to £7.5m in 2004 and include £3.8m for 'preliminary Sarbox-related services'.

A one-year wonder?

The question remains, though, whether this audit fee bonanza will continue into the future, or dry up once IFRSs are embedded in larger companies and Sarbox is just a way of life. Glyn Barker, head of assurance at PricewaterhouseCoopers, thinks the boom will be short-lived, coming to an end in 12 to 18 months' time (see box, p27). But, he says, although audit fees will decline, they will decline to a level higher than before the accounting scandals, and from there, continue to increase at a lesser rate.

Barker also said PwC's profits from audit had not increased as much as its revenues because of rising costs, but Deloitte, the only Big Four firm to so far announce its 2005 results, has revealed a revenue increase of 15.7% (to £416m) for its audit business, but a greater profit increase of 20.3% (to £117m).

PwC domination

PwC remains the most popular auditor for FTSE 100 companies, with 42 clients plus a joint audit. While the audit committees of most large companies say that the independence and value of the annual audit is tested regularly, only a handful put their audits out to tender during the year. Friends Provident, previously audited by PwC, appointed KPMG as its new auditor after a tender process. BHP Billiton is now audited solely by KPMG - last year the firm shared the audit with PwC. The only other auditor change in the FTSE 100 came as the result of the restructuring of the Shell Group.

Shell Transport and Trading, a FTSE 100 member last year, was audited by PwC.

This year the Royal Dutch/Shell group has joint auditors in KPMG and PwC. But there could be more changes for next year's survey - Deloitte recently announced that it had won the audit of Severn Trent from PwC.

Audit speeds

KPMG, the auditors of AstraZeneca, retains its title of the fastest sign-off in the west, signing off the company two days quicker than it managed in 2003. BSkyB's accounts were signed off eight days faster this year, but it was still no match for AstraZeneca.

A special mention must also go to E&Y for signing off the giant BP just 38 days after the year-end.

AUDIT PROFITS DON'T MATCH UP TO REVENUES AT PwC

PricewaterhouseCoopers says its audit fees at the top end have increased by 15% to 17% on average over the past year. Sarbanes-Oxley and International Financial Reporting Standards are the main causes of the increase, as is the growing cost of regulation, but increased corporate caution has also played a part.

'Having seen the corporate scandals in the US where perpetrators are receiving long jail sentences, some clients now want additional work done and so we're being asked to do over and above what we actually need to do,' says Glyn Barker, PwC's head of assurance.

'Our profits from audit are not going up as much as our revenues, however,' he points out. 'The increases in audit fees are generally not price increases, they're volume increases as we're doing extra work and extra hours. We're having to recruit more people to do that work and it's a very tight market for people in the accountancy profession at the moment, so our pay costs are going up dramatically, which is impacting the margins. Plus the costs of increased regulation mean we're having to put in many, many more hours in some areas. So although revenues are going up, costs are going up as well and have actually gone up a little bit faster than our revenues over the last year. And we'll need to address that in the future.'

Staff shortages across the accountancy profession have inhibited revenue growth as well. 'Our revenues and profits would probably have been higher if we'd managed to get more staff, as at the moment we are not able to do all the work that is on offer to us. We're being selective and some work we're declining because we're too busy,' explains Barker.

He thinks the extent of the audit fee boost is a one-off which will last a year or two. 'We've got the second phase of Sarbox coming through next year, we've got IFRS phasing in over the next 12 or 18 months. But I think going forward after that, the level of assurance a board of directors will want will decline, but to a level higher than it was before the big accounting scandals a few years ago. And from there it will continue to increase at a lesser rate.'

AUDIT FEES INCREASE AT BoC

The BOC Group, based in Windlesham in Surrey, spent £2.5m in audit fees last year, a 20% increase on the prior year. The company points to diverse reasons for the large rise in charges.

'The increased audit fees are in part due to changes in exchange rates which were adverse last year and in part due to agreed extensions to the scope of the audit (some of which was due to acquisitions and disposals of businesses within the group),' the company says.

'Fees for Sarbanes-Oxley work were included within audit-related services and are not part of the audit fees. We expect audit fees to rise further.

The transition to IFRS will incur some audit fees, although these should be one-off.

'Fees for Sarbox will in due course be classified as audit fees, so will further increase the audit fees line,' it comments. This significant jump in audit fees will be seen in the company's first year of compliance with Sarbox, the year to 30 September 2006.

'At this stage we do not anticipate more fees related specifically to European compliance, based on those directives currently in force. However, we expect future audit fees to rise further in response to regulatory pressure, especially as BOC also has a listing in the US, so has to comply with both US and European regulations.'

FAIR PAY FOR A FAIR DAY'S WORK, SAYS E&Y

Big Four accountancy firm Ernst & Young is straightforward in its attitude to rises in audit fees. 'Our overall view is that we should be paid fair fees for what we do,' says the firm. 'Fees went up because of:

•    additional regulation such as Sarbanes-Oxley;

•    new auditing and accounting standards such as IFRS;

•    a good level of general business activity among our clients, eg, takeovers and refinancing;

•    and an increase in our rates due to our cost base rising because of various factors, including professional indemnity insurance, training and recruitment costs.'

AMEX CHIEF LAMENTS IMPACT OF SARBOX IN US

Smaller listed companies in the US have been confronted with disproportionately high compliance costs under the Sarbanes-Oxley regime.

American Stock Exchange chief Neal Wolkoff says that the effect on some businesses is overwhelming, with audit fees trebling or even quadrupling.

A bill for $500,000 (£277,000) for auditing costs is manageable for a company with a market cap of $10bn. But for a business worth $100m it is significant expenditure, he says.

He is particularly concerned about a lack of proportionality.

'The new regulations made no distinction between a billion-dollar large-cap company and a $75m small-cap one. This has made it extremely difficult for smaller companies to compete and grow in this regulatory environment,' he wrote in the Wall Street Journal last month.

Wolkoff says that several smaller listed businesses have said their survival is at stake. They have questioned how spending such large amounts of shareholder money would benefit the shareholders enough to justify the cost.

[TB] Company Auditor Statutory Audit Other audit fee related services (£m) services (£m) (£m) 3i Group E&Y 1 0.1 0.3 Alliance & Leicester Deloitte 0.5 0.1 1.4 Alliance UniChem1 Deloitte 1.5 0.3 Amvescap E&Y 2.2 0.8 1 Anglo American*2 Deloitte 7.4 0.5 4.7 Antofagasta* Deloitte 0.2 0.1 Associated British Foods KPMG 2.7 2.6 AstraZeneca* KPMG 4.6 1.9 Aviva E&Y 7 3.1 4.8 BAA PwC 0.7 0.1 0.7 BAE Systems KPMG 4.3 0.3 4.9 BG Group PwC 2.6 0.4 0.4 BHP Billiton*3 KPMG 4.3 0.2 1 BOC Group PwC 2.5 0.9 1.1 BP* E&Y 27.6 17.1 BPB E&Y 1.4 1.2 BT Group PwC 5.6 4.4 Barclays PwC 7 5 10 Boots Group KPMG 1 0.8 British Airways E&Y 1.7 0.7 0.6 British American Tobacco4 PwC 6.3 0.2 4 British Land Co5 Deloitte 0.7 1.7 British Sky Broadcasting Deloitte 1 1 7 Cable & Wireless KPMG 3.2 1.4 1.5 Cadbury Schweppes Deloitte 4.2 0.5 1.1 Capita Group6 E&Y 0.6 0.7 Carnival* PwC 0.9 0.3 Centrica PwC 2.5 1.5 1.3 Compass Group Deloitte 3 3 Daily Mail & General Trust Deloitte 1.6 3.3 Diageo KPMG 4.7 2.1 4.2 Dixons Group Deloitte 0.8 0.1 1.6 Emap PwC 1 1 Enterprise Inns7 E&Y 0.3 0.9 Exel8 E&Y 3.8 3.2 Friends Provident KPMG 1.2 0.1 GUS PwC 3 4 Gallaher Group PwC 1.3 1.7 GlaxoSmithKline PwC 7.2 3.4 3.9 HBOS KPMG 4.8 2.5 4.3 HSBC Holdings* KPMG 21.9 5.1 9.2 Hammerson Deloitte 0.8 0.1 Hanson E&Y 4.4 0.9 0.9 Hays Deloitte 0.6 3.9 Hilton Group E&Y 2.1 1.3 ITV9 KPMG 0.7 0.3 0.7 ICI KPMG 3.1 1.2 0.7 Imperial Tobacco Group PwC 1.9 0.1 2 InterContinental Hotels10 E&Y 3.8 1.6 0.5 International Power11 KPMG 1.2 0.4 0.2 Johnson Matthey KPMG 1 0.2 0.5 Kelda Group E&Y 0.4 0.2 Kingfisher PwC 1.2 0.7 0.3 Land Securities Group PwC 0.6 0.6 Legal & General Group PwC 1.5 1.7 Liberty International PwC 0.5 0.1 Lloyds TSB Group PwC 5.2 7.3 2 Man Group* PwC 1.7 1.1 1.1 Marks & Spencer Group PwC 1.2 2.5 Morrison (Wm) Supermarkets KPMG 0.7 3.2 National Grid PwC 5 2 1 Next E&Y 0.3 0.04 Northern Rock PwC 1.1 1 O2 PwC 1 0.5 1.4 Old Mutual KPMG 5.2 2.2 4.9 Pearson PwC 4 2 Prudential KPMG 3.8 1.8 4.1 Reckitt Benckiser PwC 2.1 0.2 1 Reed Elsevier Deloitte 3 0.4 0.8 Rentokil Initial PwC 2.7 0.5 0.9 Reuters Group PwC 3 1.8 1.6 Rexam PwC 2.1 1.9 Rio Tinto* PwC 3.3 1.9 1.2 Rolls-Royce Group KPMG 3.2 1.5 1.5 Royal & Sun Alliance Insurance12 PwC 2.5 1 2.8 Royal Bank of Scotland Deloitte 8.2 1.1 6.4 Royal Dutch/Shell* KPMG/PwC 23.2 7.2 8.3 SABMiller*13 PwC 3.3 1.7 2.2 Sage Group PwC 0.9 1.4 Sainsbury (J) PwC 0.6 0.7 Schroders PwC 1.3 0.5 0.3 Scottish & Newcastle E&Y 1.5 2.3 Scottish & Southern Energy KPMG 0.4 0.2 Scottish Power PwC 1.7 0.7 3.9 Severn Trent PwC 0.9 0.1 2.2 Shire Pharmaceuticals Deloitte 1.8 1.2 2.7 Smith & Nephew E&Y 1.5 0.2 1.5 Smiths Group PwC 3.5 0.7 2.4 Standard Chartered* KPMG 3.9 3.3 Tate & Lyle PwC 1.8 0.5 0.1 Tesco PwC 1.7 0.4 2 Unilever** PwC 8.9 0.7 6.9 United Utilities Deloitte 0.6 1.1 Vodafone Group Deloitte 5 1 3 WPP Group Deloitte 8.4 7.5 4 Whitbread E&Y 0.9 0.2 0.1 William Hill Deloitte 0.3 0.3 Wolseley PwC 2.1 3.5 Xstrata*14 E&Y 2.9 2.2 0.8 Yell Group PwC 0.6 0.1 1 Totals 320.6 84.7 226.44 Company Auditor Total Previous Previous fees audit fees total fee (£m) (£m) (£m) 3i Group E&Y 1.4 0.8 1.7 Alliance & Leicester Deloitte 2 0.5 1.6 Alliance UniChem1 Deloitte 1.8 0.9 2.2 Amvescap E&Y 4 1.9 2.8 Anglo American*2 Deloitte 12.6 6.1 6.6 Antofagasta* Deloitte 0.3 0.2 0.3 Associated British Foods KPMG 5.3 2.7 5.1 AstraZeneca* KPMG 6.5 3 5.1 Aviva E&Y 14.9 6.4 13.3 BAA PwC 1.5 0.6 1 BAE Systems KPMG 9.5 3.7 8.9 BG Group PwC 3.4 1.7 2.4 BHP Billiton*3 KPMG 5.5 4.1 9.3 BOC Group PwC 5.6 2 5.5 BP* E&Y 44.8 19.9 40.9 BPB E&Y 2.5 1.3 2.5 BT Group PwC 10 5.7 9 Barclays PwC 22 6 21 Boots Group KPMG 1.8 0.9 2.8 British Airways E&Y 3 1.5 2.2 British American Tobacco4 PwC 10.5 5.4 9.6 British Land Co5 Deloitte 2.4 0.6 2.1 British Sky Broadcasting Deloitte 9 1 9 Cable & Wireless KPMG 6.1 3.2 6.7 Cadbury Schweppes Deloitte 5.8 3.8 5.9 Capita Group6 E&Y 1.3 0.5 0.9 Carnival* PwC 1.2 0.4 0.4 Centrica PwC 5.3 2.6 3.9 Compass Group Deloitte 6 2 5 Daily Mail & General Trust Deloitte 4.9 1.6 2.4 Diageo KPMG 11 4.3 16.7 Dixons Group Deloitte 2.5 0.7 1.5 Emap PwC 2 1 2 Enterprise Inns7 E&Y 1.2 0.1 0.3 Exel8 E&Y 7 2.2 3.3 Friends Provident KPMG 1.3 0.8 1.1 GUS PwC 7 2 7 Gallaher Group PwC 3 1.1 2.7 GlaxoSmithKline PwC 14.5 6.9 14.5 HBOS KPMG 11.6 4.3 9.5 HSBC Holdings* KPMG 36.2 16.7 27 Hammerson Deloitte 0.9 0.7 0.8 Hanson E&Y 6.2 2.7 4.5 Hays Deloitte 4.5 1.5 6.4 Hilton Group E&Y 3.4 2.1 3.3 ITV9 KPMG 1.7 0.5 2.8 ICI KPMG 5 3.1 4.9 Imperial Tobacco Group PwC 4 2.1 4.4 InterContinental Hotels10 E&Y 5.9 2.8 11.2 International Power11 KPMG 1.8 1 1.4 Johnson Matthey KPMG 1.7 1 1.6 Kelda Group E&Y 0.6 0.4 0.6 Kingfisher PwC 2.2 1.1 7 Land Securities Group PwC 1.2 0.5 1.2 Legal & General Group PwC 3.2 1 1.9 Liberty International PwC 0.6 0.4 0.5 Lloyds TSB Group PwC 14.5 5.5 12.2 Man Group* PwC 3.9 1.1 3.3 Marks & Spencer Group PwC 3.7 1.4 2.8 Morrison (Wm) Supermarkets KPMG 3.9 0.1 1.3 National Grid PwC 8 4 10 Next E&Y 0.34 0.3 0.4 Northern Rock PwC 2.1 0.9 1.3 O2 PwC 2.9 1 1.8 Old Mutual KPMG 12.3 4.5 10.5 Pearson PwC 6 3 5 Prudential KPMG 9.7 3.6 6.8 Reckitt Benckiser PwC 3.3 2 3 Reed Elsevier Deloitte 4.2 2.5 4.6 Rentokil Initial PwC 4.1 2.5 2.9 Reuters Group PwC 6.4 2.3 9.1 Rexam PwC 4 2 3.7 Rio Tinto* PwC 6.4 2.9 5.6 Rolls-Royce Group KPMG 6.2 3.2 7.2 Royal & Sun Alliance Insurance12 PwC 6.3 2.7 10.1 Royal Bank of Scotland Deloitte 15.7 7.2 14.8 Royal Dutch/Shell* KPMG/PwC 38.7 17.7 31 SABMiller*13 PwC 7.2 2.8 6.1 Sage Group PwC 2.3 0.5 2.4 Sainsbury (J) PwC 1.3 0.6 3.4 Schroders PwC 2.1 1.2 2.7 Scottish & Newcastle E&Y 3.8 1.4 4.7 Scottish & Southern Energy KPMG 0.6 0.4 0.5 Scottish Power PwC 6.3 1.5 5 Severn Trent PwC 3.2 0.7 1.8 Shire Pharmaceuticals Deloitte 5.6 0.6 3 Smith & Nephew E&Y 3.2 1.3 6 Smiths Group PwC 6.6 3.9 5.1 Standard Chartered* KPMG 7.2 3.3 5.4 Tate & Lyle PwC 2.4 1.7 2 Tesco PwC 4.1 1.2 2.8 Unilever** PwC 16.5 8.9 22.7 United Utilities Deloitte 1.7 0.6 1.8 Vodafone Group Deloitte 9 4 12 WPP Group Deloitte 19.9 7.3 13.8 Whitbread E&Y 1.2 0.6 0.9 William Hill Deloitte 0.6 0.3 0.8 Wolseley PwC 5.6 1.8 4.5 Xstrata*14 E&Y 5.9 1.8 8.7 Yell Group PwC 1.7 0.6 2.1 Totals 631.74 269.4 593.8 Company Auditor Days to Year end IFRS sign off reconciliation 3i Group E&Y 41 31.03.05 No Alliance & Leicester Deloitte 55 31.12.04 No Alliance UniChem1 Deloitte 55 31.12.04 Yes Amvescap E&Y 59 31.12.04 No Anglo American*2 Deloitte 53 03.03.05 No Antofagasta* Deloitte 123 31.12.04 No Associated British Foods KPMG 53 18.09.04 No AstraZeneca* KPMG 27 31.12.04 Yes Aviva E&Y 67 31.12.04 Yes BAA PwC 46 31.03.05 On web BAE Systems KPMG 54 31.12.04 Notes BG Group PwC 66 31.12.04 Yes BHP Billiton*3 KPMG 63 30.06.04 No BOC Group PwC 53 30.09.04 No BP* E&Y 38 31.12.04 No BPB E&Y 48 31.03.05 No BT Group PwC 48 31.03.05 On web Barclays PwC 69 31.12.04 No Boots Group KPMG 48 31.03.05 No British Airways E&Y 42 31.03.05 No British American Tobacco4 PwC 60 31.12.04 No British Land Co5 Deloitte 54 31.03.05 No British Sky Broadcasting Deloitte 34 30.06.04 No Cable & Wireless KPMG 64 31.03.05 No Cadbury Schweppes Deloitte 68 2.01.05 No Capita Group6 E&Y 54 31.12.04 Notes Carnival* PwC 73 30.11.04 No Centrica PwC 55 31.12.04 No Compass Group Deloitte 61 30.09.04 Notes Daily Mail & General Trust Deloitte 59 3.10.04 No Diageo KPMG 63 30.06.04 No Dixons Group Deloitte 53 01.05.04 No Emap PwC 54 31.03.05 No Enterprise Inns7 E&Y 68 30.09.04 No Exel8 E&Y 62 31.12.04 Notes Friends Provident KPMG 76 31.12.04 No GUS PwC 54 31.03.05 Yes Gallaher Group PwC 60 31.12.04 Yes GlaxoSmithKline PwC 61 31.12.04 Yes HBOS KPMG 59 31.12.04 No HSBC Holdings* KPMG 59 31.12.04 On web Hammerson Deloitte 73 31.12.04 No Hanson E&Y 55 31.12.04 No Hays Deloitte 68 30.06.04 No Hilton Group E&Y 55 31.12.04 Yes ITV9 KPMG 68 31.12.04 No ICI KPMG 48 31.12.04 Notes Imperial Tobacco Group PwC 39 30.09.04 Notes InterContinental Hotels10 E&Y 68 31.12.04 Yes International Power11 KPMG 68 31.12.04 No Johnson Matthey KPMG 61 31.03.05 Yes Kelda Group E&Y 55 31.03.05 Notes Kingfisher PwC 46 29.01.05 On web Land Securities Group PwC 45 31.03.05 No Legal & General Group PwC 54 31.12.04 No Liberty International PwC 40 31.12.04 No Lloyds TSB Group PwC 62 31.12.04 Notes Man Group* PwC 54 31.03.05 Notes Marks & Spencer Group PwC 51 2.04.05 Notes Morrison (Wm) Supermarkets KPMG 52 30.01.05 No National Grid PwC 48 31.03.05 Yes Next E&Y 53 29.01.05 No Northern Rock PwC 53 31.12.04 Notes O2 PwC 47 31.03.05 Notes Old Mutual KPMG 59 31.12.04 No Pearson PwC 58 31.12.04 No Prudential KPMG 60 31.12.04 No Reckitt Benckiser PwC 80 31.12.04 No Reed Elsevier Deloitte 47 31.12.04 Yes Rentokil Initial PwC 103 31.12.04 No Reuters Group PwC 62 31.12.04 No Rexam PwC 56 31.12.04 No Rio Tinto* PwC 55 31.12.04 Notes Rolls-Royce Group KPMG 40 31.12.04 No Royal & Sun Alliance Insurance12 PwC 68 31.12.04 No Royal Bank of Scotland Deloitte 54 31.12.04 No Royal Dutch/Shell* KPMG/PwC 117 31.12.04 No SABMiller*13 PwC 67 31.03.05 No Sage Group PwC 83 30.09.04 No Sainsbury (J) PwC 57 26.03.05 No Schroders PwC 68 31.12.04 No Scottish & Newcastle E&Y 54 31.12.04 No Scottish & Southern Energy KPMG 47 31.03.05 Notes Scottish Power PwC 55 31.03.05 Yes Severn Trent PwC 67 31.03.05 No Shire Pharmaceuticals Deloitte 74 31.12.04 No Smith & Nephew E&Y 57 31.12.04 No Smiths Group PwC 53 31.07.04 No Standard Chartered* KPMG 47 31.12.04 No Tate & Lyle PwC 62 31.03.05 Yes Tesco PwC 44 26.02.05 No Unilever** PwC 59 31.12.04 No United Utilities Deloitte 62 31.03.05 No Vodafone Group Deloitte 54 31.03.05 Notes WPP Group Deloitte 130 31.12.04 Yes Whitbread E&Y 53 03.03.05 Notes William Hill Deloitte 64 28.12.04 Yes Wolseley PwC 58 31.07.04 No Xstrata*14 E&Y 60 31.12.04 Notes Yell Group PwC 67 31.03.05 No Totals * Converted from US$ at a rate of £1: $0.55 ** Converted from euros at a rate of £1: EUR0.69 NOTES TO TABLE 1. An additional £0.1m was paid to other auditors 2. $4.2m was paid to other auditors 3. In 2003 audit was shared by KPMG and PwC 4. £0.6m was paid to other auditors 5. £0.2m was paid to other auditors 6. £0.4m of fees were capitalised 7. £0.7m of acquisition-related fees were capitalised 8. £0.1m was paid to other auditors 9. Comparatives are for 15 months to 31.12.03 10. Comparatives are for 15 months to 31.12.03 11. £0.6m was paid to other auditors 12. £0.3m was paid to other auditors 13. $1m was paid to other auditors 14. An additional $0.1m was paid to other auditors [TE] Note on compilation The survey is based on the latest available annual reports of FTSE 100 companies. Constituents of the FTSE 100 are correct as at 1 August 2005. There is some variation in the way companies disclose fees paid to their auditors. We have had to make some judgments, but broadly have classified fees as 'audit-related' if the companies describe them as such.

Companies are indicated as providing IFRS reconciliation if a comprehensive reconciliation statement is provided in the annual report and accounts.

'Notes' indicates a full summary of the likely financial effect of IFRS adoption, without a reconciliation statement. 'On web' indicates that a website link to an IFRS statement is provided in the report and accounts.

SURVEY RESEARCH AND REPORTING

by Liz Fisher

[TB] KPMG ARE SPEEDIEST AUDITORS Fastest and slowest audits Company Auditor Days AstraZeneca KPMG 27 British Sky Broadcasting Deloitte 34 BP E&Y 38 FTSE average 59 Royal Dutch/Shell KPMG/PwC 117 Antofagasta Deloitte 123 WPP Group Deloitte 130 PwC RETAINS LION'S SHARE FTSE 100 audit clients Firm 2005 survey 2004 survey 2003 survey PwC 42.5 43.5 42.5 KPMG 20.5 20.5 23 Deloitte 19 20 18 E&Y 18 16 15.5 [TE]

KPMG EXPECTS AUDIT FEES TO RISE

Michael Hughes, chairman of KPMG's UK audit practice, said: 'The recent raft of new regulatory and reporting requirements has meant that considerably more work is now required to conduct an audit. Restating accounts under IFRS and signing off on Sarbanes-Oxley s404 for US registrants have been the main components.

'New audit standards and the compilation of operating and financial reviews (OFRs) by some early adopters have also contributed towards it. Audits of UK corporates are becoming increasingly complex and time-intensive, and this is the root cause for the greater spend on audit fees over the period.'

Hughes believes that audit fees are likely to rise. 2005 sees the first full year of reporting under IFRS, as well as s404 certifications for foreign registrants. OFRs will also have to be completed on a mandatory basis. The amount of work going into fulfilling a company's reporting obligations looks set to continue to rise.

OLD MUTUAL UNAFFECTED BY SARBOX

IFRS is the chief cause of audit fee increases at insurer Old Mutual.

The company spent £5.2m on its statutory audit this year as opposed to £4.5m last year. 'The main reasons for increases are the adoption of IFRS, and due diligence for acquisitions that are not successful or do not proceed following due diligence,' the company told Accountancy.

'Any increase in internal audit is purely corporate governance since Sarbanes-Oxley is not applicable to us at present.'