Audit Fees Cost Public Companies Millions

by Luke Jones  on Monday, Aug. 20, 2012 12:00 am  

It's been 10 years since the Sarbanes-Oxley Act was passed to clean up Enron's mess, and public companies are still paying big accounting bills - although some of them actually declined in 2011.

The complexity of the auditing process means corporations hand over hundreds of thousands or millions of dollars to auditors every year.

Wal-Mart Stores Inc. of Bentonville, for example, paid Ernst & Young LLP of London more than $15 million for its services in fiscal 2012, down from $17 million the previous year. That's about 0.3 percent of Wal-Mart's nearly $450 billion in 2012 revenue.

Arkansas is home to 17 publicly traded companies in Arkansas, and Wal-Mart and five others spent more $1 million on auditing fees in their most recent fiscal years. KPMG LLP, the Dutch accounting giant, did the work for Dillard's Inc. ($1.1 million) and Acxiom Corp. ($2.9 million), both of Little Rock. PwC LLP, the company formerly known as PricewaterhouseCoopers, does the auditing for Windstream Corp. of Little Rock ($3.2 million), Tyson Foods Inc. of Springdale ($4 million) and Murphy Oil Corp. of El Dorado ($3.2 million).

J.B. Hunt Transport Services of Lowell saw its audit fees go down from just over $1 million in 2011 to $972,404 in 2012.

The Center for Audit Quality in Washington, D.C., is a nonprofit that works with auditing companies. According to its guide to public company auditing, "the independent auditor's overarching goal is to provide financial statement users with reasonable - but not absolute - assurance that the financial statements prepared by management are fairly presented."

The process is coordinated generally among four distinct groups: the public company's audit committee, which selects the auditor and oversees reporting; the independent auditor, which performs the audit itself; the company's management; and sometimes an internal auditor for improving operational efficiency and other services.

Most of the companies employ the larger public auditors, with three of the big four represented: E&Y, PwC and KPMG.

KPMG is most popular among Arkansas' public companies, with four, followed by E&Y, BKD LLP of Springfield, Mo., and Grant Thornton LLP of Chicago, all of which are employed by three public companies in the state.

The other firms involved with the companies include HoganTaylor LLP of Oklahoma City and Crowe Horwath LLP of Oak Brook, Ill.

Just as Wal-Mart, the company with the most revenue, paid the biggest audit fee, the company with the least revenue had the lowest accounting bill: Advanced Environmental Recycling Technologies Inc. of Springdale. It paid HoganTaylor $154,168, or 0.2 percent of its 2012 revenue of $59 million.

A few companies had dramatic changes in fees between the two most recent fiscal years. Wal-Mart, as mentioned, paid about $2 million less in 2011 than in 2012. Windstream's fees decreased by around $500,000. According to Windstream's 2012 proxy statement filed with the U.S. Securities & Exchange Commission, the higher 2011 fees were due to work performed in connection with Windstream's acquisition of Q-Comm Corp. of Overland Park, Kan., in 2010. The 2010 acquisitions of NuVox Inc. of Greenville, S.C., Iowa Telecommunications Services Inc. of Newton, Iowa, and Hosted Solutions LLC of Raleigh, N.C., also figured into the fees.



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