Audit Fees 501

  • :?: With all the talk about how high audit fees are this year related to SOX, what exactly is the bottom line for audit firms? What’s the standard gross margin on a public company audit? If they’re charging USD40 million to audit a global company, what’s the profit?

  • When I was working for 2 of the big 4, the rule of thumb was-
    a third of the fee to cover staff salaries
    a third of the fee to cover operating costs
    a third of the fee to the partners’ pockets
    But there will be different margins on different pieces of work, different locations etc.
    The audit firms do publish their numbers nowadays- you can probably track them down to see exactly how profitable they are if you really want to.

  • The rule of thumb probably doesn’t quite work any more - mainly due to the big increase in Professional Indemnity Insurance premiums.%0AOverall margin is probably more like 25%%0AOf course, no firm will have lowballed the audit fee hoping to pick up other ‘advisory’ work. :roll:

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