What are acceptable reasons to increase audit fees

Mid-audit changes to audit fees

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Dealing with one particular auditor over a number of entities who low-balls on fees and then almost encourages errors/reclassifications etc. during audit in order to justify increased fees.  Seeing a different auditor who ended up going to moon and back as it turned out and didn't remotely consider increasing fees.  Starting to have to go down the fixed fees route which probably will create other issues.

Anyone any advice?

To elaborate - one entity which the auditor completely knew was going to be liquidated, continued to audit as a going concern right until the last day and then threw in additional fees of +26% on the original audit fee when they then demanded it to be prepared/audited re: other than going concern which changed very very little of what was in the accounts.

Replies (11)

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Stepurhan
By stepurhan
25th Mar 2024 10:43

Sounds like a legal question rather than an accounting one. What does the agreement with the auditor say regarding how fees are calculated? If they genuinely audited based on an assumption that they would have known from the start was false, that is likely to be a better case than simply seeing increases you don't like.

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RLI
By lionofludesch
25th Mar 2024 10:55

Sounds like a cowboy auditor.

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John Toon
By John Toon
25th Mar 2024 11:28

Plenty of acceptable reasons, none of which a fixed fee will sort, as any auditor will have a provision in their T&Cs to deal with overruns if caused by unforeseen issues and outwith their control.

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Replying to johnt27:
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By paul.benny
26th Mar 2024 08:55

+1
I've been on the receiving end of additional fees because we were not particularly well prepared for audit.

And also in a multinational group, where the local fee allocation is determined centrally - but doesn't cover the time required.

But I've also had a Big4 firm totally taking the p with the time billed - even though much was due to their behaviour.

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DougScott
By Dougscott
25th Mar 2024 11:50

Are you mixing up auditing and accounting. If accounts need to be "prepared" then that is accounting.

It is normal for audit fees to be fixed if you present completed statutory accounts and the reputable (medium sized) auditors I have experience off have not sought to ever increase audit fees if they are presented with decent accounts.

However accounting fees for preparing accounts are a different matter and are more likely to be variable.

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Replying to Dougscott:
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By tom123
25th Mar 2024 12:12

I'm interested to know what you define as "prepared".

Would you consider a fully analysed TB with supporting schedules prepared, or would you want the client to have a go at putting them in statutory format? (if so, how - on Word?)

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Replying to tom123:
DougScott
By Dougscott
25th Mar 2024 13:53

When I was a Finance Director we always prepared statutory accounts for our auditors - you can use software or checklists to do so - and in fact when I was an auditor in my early days most clients who weren't micro-businesses had their own finance professional capable of preparing statutory accounts.

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Replying to Dougscott:
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By tom123
26th Mar 2024 09:14

I mean, I get the idea - but, from my side of the fence, annual accounts are a once a year thing. I could take last years PDF, convert it to word, and copy and paste some numbers in - but it would look pretty ropey.

Auditors have software to do this stuff - we don't.

Not that it has ever presented an issue for me in recent times, a TB and supporting schedules for the notes seems to have sufficed.

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By Yellowman
25th Mar 2024 11:53

The other side of the coin is, did you tell them your accounts were 'all fine/very simple/etc'.

If they cannot obtain reasonable assurance , you could compromise and qualify the report. (I've seen it done)

Going concern - it is the directors responsibility to determine the basis. If you communicated this clearly when the audit was planned, you could have a comeback on the fees. However you must have prepared your records on a basis other than going concern.

You also won't see the work that goes into forming the opinion that the GC basis used is appropriate. But I can tell you its often extensive.

Reality is audit fees are up due to heaps of regulation added each and every year and a shortage of staff / firms. I would speak to the engagement partner asap. Meet in the middle and get quotes for next year from various firms.

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By Roland195
25th Mar 2024 12:21

I take it you are the audit client in this? If so, I don't think there is much to choose between it - you will either get low ball quotes with additional work required, fixed fees that may be more expensive in the first place & even then not as fixed as you would like or you'll get a relatively cheap audit if paying them for other services (tax planning, financial consulting etc).

Do you feel the current auditor isn't actually providing an acceptable service for the cost involved?

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By Yellowman
25th Mar 2024 12:49

Did you say 'it should be easy / the records are all fine / simple' ?

On the going concern element; were accounts prepared on a basis other than going concern for the liquidated entity. A lot of work is required to agree to the assessment by directors, which you wont see in the accounts but is crucial to the opinion formed.

Pretty much one of the first planning questions in every audit is going concern. So if you've told them and prepared as such, you can have comeback on some of the fees. If they ignored you.

Truth is audit regulations are going up and the number of auditors and firms are reducing - which means increased costs.

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