A cursory glance at this year's Accountancy survey of fees paid to auditors by the FTSE 100 might suggest that the audit market had undergone a seismic shift.

Gone are the days when firms could hope to earn millions in fees from non-audit work, often at the expense of a loss-leading audit. For the past few years the fees earned from the statutory audit of the FTSE 100 companies have been steadily rising, while the growth of non-audit fees has stalled.

This year, the distinction between the two is startling - the Big Four firms saw an overall increase in fees earned from statutory audit of the FTSE 100 of 18%, while total fees earned by the firms increased by just 7%. Fees for non-audit work fell slightly. Figures can be seen in the table below.

The source of this year's huge increase in statutory audit fees is tricky to identify. The report into competition in the UK audit market by the consultancy Oxera in 2006 suggested that there was evidence that lack of competition in large company audits has led to higher audit fees.

The real picture, however, is more complex. There is no doubt that statutory audit fees have increased steadily in recent years, but this is due to many factors including increased regulation, greater demands on auditors and in the case of this year's survey, a change in the way companies disclose the fees paid to their auditors.

The results of our survey have been complicated by the introduction of new statutory guidelines covering the disclosure of auditor remuneration in company accounts. The new guidelines (see box) require separate disclosure of statutory audit fees, of fees earned from the audit of subsidiaries, of non-audit fees and most importantly in terms of our survey, of fees earned from work 'pursuant to legislation'. Companies' different interpretations of the work that falls into this category means that the exact nature of audit-related services is not always clear.

Aside from the presentational change, it is clear that companies have seen an increase in fees paid to their auditors thanks to the requirements of the US Sarbanes-Oxley Act and, to a lesser extent, the introduction of International Financial Reporting Standards (IFRS). Again, the precise details of the costs associated with each are difficult to pinpoint, although a number of companies do disclose a breakdown of the fees paid.

AstraZeneca, for example, says in its accounts that it paid $3.2m (£1.6m) in Sarbox-related fees to its auditor during the 2006 financial year, compared with $1.8m in 2005. The large multinational companies, of course, are seeing even more significant costs. Of Barclays' £28m in audit fees, £10m were, according to the bank, due to Sarbox-related costs.

Elsewhere, Lloyds TSB said that Sarbox and its 20-F filing in the US accounted for £4.7m of audit-related fees, while ICI said that £3.1m of its £3.5m in audit-related fees were due to the Act. Pearson and United Utilities paid out £4m and £4.6m on Sarbox-related advice respectively during the year.

Costs related to IFRS transition advice from company auditors, on the other hand, seem to be less significant this year, as all of the FTSE 100 are now required to produce IFRS accounts. Of the few companies that disclose details of their IFRS-related costs, Compass Group and DSG International both say that their costs amounted to £200,000 each, while Invesco says that it spent $600,000 on IFRS transition advice from its auditor.

The tighter controls on non-audit work carried out by auditors mean that significant fee revenue from other work is appearing less frequently in our audit fees survey. Where companies disclose the details, much of the non-audit work carried out by audit firms relates to tax advice, although there is the odd oasis of fees earned from specific transactions, such as mergers and acquisitions. Experian Group, for instance, paid out $19m in fees to PwC during its demerger from GUS.

This apparent decrease in non-audit fee revenue will not be a cause for concern for the Big Four since in all likelihood the FTSE 100 are simply choosing one of the remaining three large firms to advise them on particular transactions. The same (or probably larger) pot of money, in other words, is simply being spread among the Big Four in a different way. And as long as companies are only required to disclose non-audit fees paid to their auditor, we will never know exactly how much the Big Four earns from the FTSE 100. Overall, this year's survey is unlikely to do much to stop the debate about competition in the UK's accountancy profession.

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