Fees for non-audit services fall by almost a quarter
Fees paid to the auditors of FTSE 350 companies for non-audit services has fallen by 24% over the last year, this is according to audit firm Grant Thornton.
The audit firm’s twelfth annual Corporate Governance Review shows that fees paid fell to 68% of audit fees in 2012 to 51.7% in 2013.
This is also visible among FTSE 100 companies, where non-audit fees on average now represent 33.7% of the external audit fee, representing a 43% drop.
“This reduction of non-audit fees must not lead to complacency amongst the stakeholder community and is likely to be a reflection of the current high profile media commentary around better auditor independence; coupled with the lacklustre economy and reduced M&A activity,” said Simon Lowe, chairman of the Grant Thornton Corporate Governance Institute.
Elsewhere chairmen, both of committees and the group, are taking greater personal accountability for standards of governance with personal introductions to governance statements rising markedly.
The research also found that companies provide shareholders with limited information on risk management and internal control, with only 27% of the FTSE 350 provide real insight into how they review the effectiveness of their systems of internal control, showing no improvement year on year.
Additionally, 84% do not demonstrate an integrated reporting approach, failing to demonstrate the link between discussion of their business model, future plans, strategy and key risks.
The new EU audit reform will mean auditors will be banned from offering certain non-audit services to their clients resulting in more of a drop in fees for non-audit services. Within the EU audit reform the area of non-audit work remains unclear. Non-audit work such as tax advice and services linked to financial and investment strategies have been completely banned. But auditors have been left in the dark as to what exactly will be on list of banned work. Read more in our previous blog Auditors left in the dark as to what exactly will be on list of banned non-audit work
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