External audit fees are expected to rise 62% this year, as inflationary pressures, Covid-19 impacts and acquisitions and divestitures drive the price increases.
According to a survey conducted by Gartner, a global research and advisory firm, organizations that automated at least 25% of their internal controls paid on average 27% lower audit fees.
The survey was composed of 166 publicly traded and privately held external audit firm clients in March to April 2021.
Of the respondents, whose revenues ranged from companies with revenues above $10bn to below $500m, 81% employed a Big Four audit firm.
Ashwani Gupta, director of Gupta’s finance department, said: “With audit fees increasing significantly, finance leaders should take note that organizations with higher levels of internal control automation saw substantially lower external audit fees on average.
“Automation of internal controls can play a role in not only reducing financial reporting and audit risks but also audit costs.”
He added that as organizations “invest in internal controls automation” it will most likely become a key argument for “audit fee reductions in the future”.
While audit fees also increased by 69% in 2020, Gartner claimed that of the respondents who attempted to negotiate their fees, 45% were able to decrease their audit fees by over 6%.