For Canadian companies, the compensation of the external auditor is disclosed pursuant to the Multilateral Instrument 52-110 on Audit Committees, which describes in Item 9 the following categories of fees that are to be disclosed: (1) Audit Fees, (2) Audit Related Fees, (3) Tax Fees, and (4) All Other Fees.
Similar to the trends we’re seeing among SEC registrants, the number of SEDAR issuers has been declining over the years. In turn, the number of issuers reporting audit fees has continued to decline; in 2018, 2,963 issuers reported audit fees – an 8% decrease from 2017.
Since 2007, the average amount of audit fees per Canadian company has continued to increase each year. Non-audit fees have similarly increased, but experienced a 17% drop from a high of $127,000 in 2016 – averaging $106,000 in both 2017 and 2018. The average amount of audit related fees per company has also steadily increased since 2013, with a slight dip in 2017 followed by an increase of roughly 14% in 2018 – jumping from $106,000 to $123,000.
A review of non-audit fees as compared to audit fees is of interest, as high non-audit fees could indicate an auditor independence concern. At times, analysts prefer to view audit fees as its own category, while others prefer to see audit fees and audit related fees collectively. For these reasons, this analysis provides both approaches.
The graph below displays audit fees (including audit related) and non-audit fees as a percentage of total fees. Audit and audit related fees, as a percentage of total fees, have increased over the last two years, totaling 88.0% percent of total fees in 2018 – the highest amount in the twelve years analyzed.
Audit fees alone (excluding audit related) totaled 74.0% of total fees in 2018. The proportion of non-audit fees (including audit related) to total fees leveled off in 2017 and 2018 after a spike in 2016. These percentages have remained relatively stable since the high of 28% in 2007.
Further expanding, the chart below provides the breakdown of audit, audit related, and non-audit fees as a percentage of total fees.
As shown, audit related fees have increased every year since 2013, totaling 14.0% of all fees in 2018.
Note: All amounts stated are in Canadian Dollars.
1. Includes dual-listed companies that file with both SEDAR and EDGAR. Subsidiaries whose fees are disclosed as part of the parent company’s fees were excluded. ↩