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Indian companies paying Just Rs. 16 for every Rs 1 lakh of the company’s turnover in 2011

How much did auditors charge companies to certify that their financial records are in order? Just Rs 16 for every Rs 1 lakh of the company’s turnover in 2011, suggests a report by the Chennai-based chartered accountancy training centre, Prime Academy. Audit fees are actually down from Rs 17.4/lakh of turnover in 2010 and Rs 18.2/lakh in 2006. That suggests companies are not really paying more for ensuring compliance, despite an increase in the size/turnover of their business over this period. A report, titled ‘Who are India’s top auditors and how much do they charge’ has considered a sample of 2,332 listed companies that account for 77 per cent of the total market capitalisation of BSE.

WHO PAYS MORE?

But sectors that have plenty of compliance issues to tackle appear to be spending more on audit fees. Companies in sectors such as oil and gas, power and transport and communication paid Rs 84 lakh to Rs 1 crore on an average for an audit. Oil and gas emerged as the top paying industry. In all, audit firms charged an average Rs 21 lakh for each audit they undertook in 2011.

A similar analysis done by Prime Academy in 2006 placed this figure at Rs 28 lakh.

Increasing competition among audit firms could be one reason for a fall in audit fee. Deloitte Haskins & Sells, S.R. Batliboi & Co and S.R. Batliboi & Associates took the first three spots respectively in the list of top earners of audit fees from these sample companies.

The last two mentioned companies are the audit arms of Ernst & Young in India.

The declining audit fee is, however, visible in some of the large audit firms, which audited the 2,332 sample companies.

Among the top ten players conducting audits, the fees earned by Price Waterhouse, Chaturvedi & Shah, Lovelock & Lewes and Dalal & Shah fell in 2011 compared with the previous year.

In the audit fee ranking, Price Waterhouse, in fact, slipped from the third spot in 2010 to fourth in 2011.

Most of the large multi-national firms provide consultancy and assurance services besides audit services.