Audit fee increases accelerated again in fiscal year 2024, with average fees for U.S. public companies rising roughly 8% and the typical public-company audit bill passing $2.7 million. Large accelerated filers now average more than $6 million. The rise isn’t cyclical. Five structural forces are pushing fees up at the same time: a shrinking supply of accountants, expanding regulatory scope, growing client complexity, concentrated competition among audit firms, and rising liability costs. They reinforce each other, and nothing in the current environment suggests they’re about to reverse.
Not Enough Accountants
Labor is the majority of any audit fee, so the profession’s staffing crisis shows up directly on the invoice. More than 300,000 accountants left the field between 2019 and 2022. Accounting graduates fell about 10% from 2021 to roughly 47,000 in the most recent AICPA reporting period, and new CPA exam applicants dropped from 48,004 in 2016 to 28,082 in the 2023–2024 cycle. The Bureau of Labor Statistics projects about 136,400 accounting openings per year, which the current pipeline cannot fill.
The 150-credit-hour CPA education requirement discourages entrants by effectively adding a fifth year of college, and finance and tech careers pay better without demanding it. Baby-boomer partners are retiring on top of that. Some states have begun loosening the 150-hour rule and 2024 accounting program enrollment ticked up 12%, but bachelor’s completions are still falling, so any relief is years out.
Firms are responding with aggressive raises and retention bonuses, and those costs flow straight into billing rates. Specialists in cybersecurity, forensic accounting, and complex valuations — exactly the skills the PCAOB’s inspection focus now demands — command premium rates well above general audit staff.
Regulators Keep Expanding The Scope
When oversight bodies add focus areas, auditors add hours. The PCAOB’s 2025 inspection priorities target financial services firms exposed to commercial real estate and interest-rate volatility, technology companies with AI-related inventory valuation questions, and any company involved in mergers or business combinations. The priorities also push harder scrutiny of going-concern assessments, critical audit matters, and the use of technology in audit procedures.1Public Company Accounting Oversight Board. Spotlight Staff Priorities for Inspections and Interactions With Audit Committees
New PCAOB standards compound the effect. Amendments to AS 1201 and AS 2101 reshape supervision of multi-location audits, AS 2310 changes confirmation procedures, and AS 1206 adds requirements for how a lead auditor divides work with other firms. Each new standard forces retraining, methodology updates, and often additional procedures that didn’t exist before.1Public Company Accounting Oversight Board. Spotlight Staff Priorities for Inspections and Interactions With Audit Committees
The SEC adds another layer. Its interpretive guidance on internal controls over financial reporting has pushed auditors to identify and classify deficiencies more rigorously, which means more testing.2U.S. Securities and Exchange Commission. Definition of the Term Significant Deficiency The SEC’s final climate disclosure rule requires large accelerated filers to begin providing limited assurance over Scope 1 and Scope 2 greenhouse gas emissions for fiscal years beginning in 2026, accelerated filers in 2028, and reasonable assurance phasing in for large filers by 2033.3U.S. Securities and Exchange Commission. The Enhancement and Standardization of Climate-Related Disclosures Commenters warned the attestation requirement would substantially raise audit fees, and companies in scope for 2026 are already budgeting for it.
New accounting standards from FASB add their own waves. ASC 842 brought operating leases onto the balance sheet, creating entirely new audit populations around lease inventory completeness, discount rates, and practical expedients.4The CPA Journal. A Discussion of Practical Expedients in ASC Topic 842 ASC 606 did the same for revenue recognition. The first-year implementation spike eventually fades, but ongoing testing of these complex standards is a permanent addition to scope.
One regulatory trigger produces a sharp, predictable jump: crossing into nonexempt status under Sarbanes-Oxley Section 404(b), generally at $75 million or more in publicly held shares for companies that don’t qualify as emerging growth companies. A GAO analysis found a median audit fee increase of $219,000, or 13%, in the first year a company becomes nonexempt. Overall, nonexempt companies pay about 19% more than exempt peers.5U.S. Government Accountability Office. Sarbanes-Oxley Act – Compliance Costs Are Higher for Larger Companies If your company is approaching that threshold, build the increase into your forecast now.
Your Own Complexity Drives The Bill
An audit fee is fundamentally a function of hours. Growth through acquisition adds consolidation work, purchase price allocation, and goodwill impairment testing, along with the task of evaluating new accounting policies, unfamiliar IT systems, and new personnel. The PCAOB specifically flags recent M&A activity as a selection factor for inspection, which pushes firms to staff these engagements more heavily.1Public Company Accounting Oversight Board. Spotlight Staff Priorities for Inspections and Interactions With Audit Committees
Multinational operations multiply the work. Component auditors in each jurisdiction, statutory reporting layered on top of U.S. GAAP, and SEC-required reconciliations that must be audited and opined on separately all add distinct workstreams a purely domestic company never sees.6U.S. Securities and Exchange Commission. Division of Corporation Finance – International Financial Reporting and Disclosure Issues
IT environment complexity catches many finance teams off guard. Multiple legacy systems, fragmented ERPs, or hybrid cloud setups force the audit team to bring in IT specialists who bill at premium rates to test system controls, data migration, and access management. Transactions involving significant estimates, such as fair value measurements, derivatives, and impairment assessments, bring in valuation experts at similar premiums.
Few Firms, Little Competition
The Big Four — Deloitte, EY, KPMG, and PwC — audit nearly every S&P 500 company. In fiscal year 2022 they collected roughly 99.7% of the $5.3 billion in audit fees paid by S&P 500 companies; Grant Thornton and BDO split about $15 million. That concentration suppresses the price pressure competition would normally create.
Switching costs reinforce the lock-in. Academic research puts first-year fees from a successor auditor about 15% higher than the predecessor’s, reflecting startup work to understand the business and test opening balances. A 2003 GAO study estimated mandatory rotation would raise first-year costs by more than 20%. The number of registered audit firms has been shrinking for years, and mid-tier firms face the same talent squeeze as the Big Four, so clients negotiate from a weak position once an engagement is in place.
Risk And Liability Get Priced In
Professional liability insurance premiums have climbed sharply across the profession, with the steepest increases in financial services and technology. Claims against accounting firms have grown in both frequency and severity, and insurers have repriced accordingly. Those premiums are overhead the firm recovers through billing rates on every engagement.
Your own risk profile shapes the staffing mix. A client with a history of restatements, aggressive accounting positions, complex debt covenants, or elevated fraud risk gets more partner and senior-manager time, which protects the firm from litigation and costs significantly more per hour than a junior-weighted team. Partner review, technical consultation, and quality control checks are non-billable time the firm recovers through the engagement fee.
Firms are also investing heavily in AI analytics, continuous monitoring, and data extraction tools. These eventually produce efficiencies, but the near-term capital and specialist costs add to the base. The PCAOB’s focus on how firms use technology makes manual-only approaches hard to defend, so the investment is largely non-optional.1Public Company Accounting Oversight Board. Spotlight Staff Priorities for Inspections and Interactions With Audit Committees
What You Can Actually Do About It
None of the structural drivers are under your control, but how your company handles the engagement is. The biggest lever is readiness. Every hour an auditor spends chasing a missing reconciliation, re-requesting a schedule, or waiting for a management response is billed at full rate. Teams that deliver clean, complete workpapers on a committed timeline pay less than those that treat the audit as the auditor’s problem to figure out.
Running a competitive RFP every few years helps even when you keep the incumbent. Research shows audit quality is higher in bidding years and the process produces modest fee concessions, with the quality improvement persisting after reappointment. You don’t have to change firms to benefit; you have to make the incumbent compete.
Audit committees should engage with the fee structure during planning, not after the engagement letter arrives. Ask for the breakdown between base hours, specialist time, and risk premium. If IT environment is driving specialist hours, system integration or stronger internal controls may bring those down. If a new regulatory requirement is expanding scope, early coordination with the audit team on your implementation approach is cheaper than letting them discover it mid-fieldwork.
Understand the offshore delivery picture. All Big Four firms operate large service centers in India, and several have growing operations in the Philippines, handling portions of the work at lower labor cost. The savings don’t always reach the client invoice, and proposed legislation and tariff scenarios could narrow the cost advantage further, pushing firms toward blended onshore-offshore models with tighter margins.
Why You Can’t Just Stop Paying
Falling behind on audit fees is more dangerous than most finance teams realize. The SEC’s position is that prior-year audit fees should generally be paid before the current engagement begins, or the auditor’s independence may be in question. The SEC will accept either a definite commitment to pay before the current audit report is issued, or an arrangement for periodic payments with reasonable assurance the current fee will be settled before the next year’s audit begins.7Securities and Exchange Commission. Office of the Chief Accountant – Application of the Commission’s Rules on Auditor Independence
When unpaid balances persist and grow material relative to the expected current-year fee, the auditor can appear to hold a financial interest in your results, which is a direct threat to independence. For a public company, losing auditor independence means losing the ability to file audited financials with the SEC, which can trigger delisting and debt covenant violations. The AICPA’s ethics interpretation at ET §1.230.010 applies a parallel framework to private-company audits. Budget for the increase. The alternative costs far more.