Fees paid to FTSE 100’s auditors hit record sums of more than £1bn
The UK’s top 100 listed companies paid more than £1bn to their auditors for the first time in 2021/22, following a steady uptick in audit fees linked to a tougher stance from the UK’s accounting regulator.
FTSE 100 companies paid a record £1.01bn to their auditors for both audit and non-audit services, in the year ending in June 2022, new Thomson Reuters Confirmation research shows.
The record sum paid out to auditors comes as audit fees paid out by the UK’s FTSE 100 companies have increased 22 per cent since 2020/21.
The uptick saw FTSE 100 audit fees increase nine per cent in the past year alone, from sums of £798.7m in 2020/21 to £869.6m in 2021/22.
The increase in audit fees offset a 10 per cent drop in fees paid out for non-audit work over the same period of time, which saw non-audit fees fall from £166m in 2020/21 to 148.6m in 2021/22, the research shows.
The overall rise in fees comes as auditors face increasing scrutiny from the UK’s accounting watchdog over the quality of their audit work, following a series of high-profile audit scandals.
Thomson Reuters Confirmation managing director Kyle Gibbons said: “There’s a general acceptance that if audits are going to be thorough and of high quality then those fees needed to go up.”
FTSE 100 audit contracts continue to be dominated by the Big Four accounting firms – EY, KPMG, Deloitte, and PwC – who last year audited all of the UK 100 largest listed companies.
The UK’s Financial Reporting Council (FRC) has previously raised concerns that accounting firms are selling their audit services at a loss in seeking to win consulting business, which now accounts for the bulk of the Big Four’s revenues.
“The regulator is also going to be pleased that audit firms are selling less non-audit advice to their audit clients,” Gibbons said. “There has been a long running concern that this jeopardised the ability of the auditors to challenge management.”
The FRC currently caps the amounts of revenue auditors are able to generate selling non-audit services to audit clients at rates of 70 per cent of any fees generated during its last three audits.
The research comes as EY pushes forwards with plans to separate its global audit business from its consulting segment in a bid to free itself from the conflicts-of-interest rules that block it from selling tax and advisory services to audit clients.