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Negotiating lower audit fees a slippery slope

by Graceanne Bowe

November 4, 2010

A former SEC accountant cautioned companies that a sharp drop in the fees that companies pay to auditors may be a red flag to investors, according to a recent CFO Magazine article, "Audit-Fee Fall:  It's a Matter of Trust" (www.cfo.com/article.cfm/14535614).

According to Lynn Turner, who is now represented on the board of a multi-billion dollar retirement investment firm, "[The] concern is [whether] you're paying your auditor enough to make sure it does a quality audit."

This may come as frustrating news to companies trying to keep compliance and audit costs under control--after all, audit expenditures don't directly drive dollars to the bottom line.   One way to allay investor fears, according to the article, is to make sure that your company has a solid audit committee making the decisions about which auditors to engage, rather than the CFO.   It's appropriate for the financial and business executives to do the preliminary legwork, but turning the final decision over to the audit committee can go a long way toward assuring investors and the Public Company Accounting Oversight Board that a company has done its homework to ensure a thorough, quality audit.

 

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