London, February 26 2024. For Immediate Release.
QCA RESEARCH REPORT “IT DOESN’T ADD UP: THE CRISIS OF UNAFFORDABLE AUDITS” HIGHLIGHTS HOW AUDIT FEES HAVE SURGED DRAMATICALLY OVER THE PAST FEW YEARS.
By our estimate, the average percentage rise has increased by five times the rate of inflation.
This is resulting in significant challenges for quoted companies, particularly those outside of the FTSE 350 whose growth and success are crucial to the health of the UK economy.
From 2017/18 to 2022/23, the average percentage change in audit fees skyrocketed by a staggering 127%. For companies across various markets, including the LSE Main Market, AIM, and AQSE, this translates to an average increase of nearly £300,000 between 2017/18 and 2022/23.
This surge in audit fees is attributed to several factors:
- An evermore complex regulatory landscape that combines increased reporting standards and additional documentation requirements,
- Increased risk aversion and more stringent selectivity among audit firms,
- Talent and staffing challenges of audit firms, and
- Concerns about profitability
The reducing number of auditors is also causing further difficulty for companies who are struggling to find a suitable auditor.
As a result, companies with huge potential to grow on the UK equity markets are facing financial strain, diverting funds from essential areas like research and development and limiting potential for expansion.
The implications of unaffordable audits are far-reaching, impacting not only the financial health of individual companies but also the health of the UK economic ecosystem.
We believe that it’s crucial to address this issue now.
The QCA has put forth several recommendations that aim to:
- Streamline the audit process to promote efficiency;
- Enhance the attractiveness of the industry;
- Evaluate the liability regime and considering a shift from individual to collective accountability; and
- Promoting transparency and benchmarking within the industry.
For further Information, including to request a copy of the report, please contact:
Ruby Halabi
Communications Officer, The Quoted Companies Alliance
E: ruby.halabi@theqca.com
T: 020 7397 8140
