As various industry data affected by the recession continues to be scrutinized, the amount being paid to auditors cannot be overlooked. The graph below explores how the most recent recession had an effect on various sub-industries with respect to the relationship between audit fees and revenues.*
The most dramatic rise in the audit-fees-to-revenue ratio is seen in the Savings Institutions sub-industry, a segment of the U.S. financial sector that consists of banks with an average market cap size of roughly $450M. This jump is explained by a whopping 53.6% drop in total sub-industry revenue in 2008.
The data shows a much less dramatic increase in related sub-industries like Commercial Banking and Direct Property & Casualty Insurance Carriers. These two categories include such institutions as Bank of America and AIG, whereas examples of Savings Institutions include lesser-known banks such as First Niagara Financial Group, Inc. and Berkshire Hills Bancorp, Inc. Considering industries that would require increased oversight during a financial downturn, it is easy to understand a jump in percentage as audit fees rise and revenues fall. However, the larger institutions of the Commercial Banks and Insurance sub-industries appear to have weathered the storm more easily than the smaller financial institutions.
Audit fees rose by 15.3% in 2008 in the Commercial Banking category and 8.8% in Direct Property & Casualty Insurance Carriers. This provides an interesting juxtaposition to a less cyclical sub-industry such as Pharmaceuticals which was not necessarily faced with the same audit challenges or disastrous decreases in revenue. Pharmaceuticals actually saw an industry wide decrease of 0.9% in audit fees in 2008.