Confidence in our business communities is essential to New Zealand’s prosperity. High quality, independent audit is the cornerstone of that confidence.
Our 2023 Audit Quality Transparency Report analyses the drivers of audit costs, and the impact these have on audit quality. We mark the year against the framework used by KPMG to measure and deliver audit quality
The cost issue
This year we decided to focus on ‘the cost issue’. We lay bare the ‘big five’ drivers of audit costs over recent years and how the audit profession is responding to them, to arm the director community and other stakeholders with the facts to judge the value you’re getting for your rising audit costs.
Our analysis found five key drivers in the cost of an audit:
- Professional services salary inflation – the need to pay our people more to attract and retain talent
- Increased total hours – driven mainly by new compliance requirements
- A new deal with our people – the answer can no longer be that our people just work harder
- Technology – bringing about dramatic quality benefits, rather than cost reductions
- Other cost inflation – the combination of additional compliance costs, underlying inflation and a weak New Zealand Dollar.
Whilst shareholders want management and directors to control costs, audit fees are seen as ‘good costs’. They are there to serve a purpose, and an important one.
We’ve done trend analysis in the past, but it’s hard to know what is really happening across the industry due to the many factors impacting the audit fees. Examples include change in scope, billing of overruns and or a competitive tender which make the information unable to be compared based on the disclosures in the financial statements.