Survey reveals steep hike in audit fees.

A Financial Executives Institute survey of 1999 independent audit fees showed they have climbed sharply since 1997, when the FEI last conducted such research. Fees charged in the United States increased an average of 46% while international fees soared to an average of 69% more.

The FEI nevertheless cautioned against interpreting the results as proof of a trend toward dramatically higher audit fees. According to Janet Luallen, an FEI director, the two years' survey results varied because different companies provided audit fee information and because the number of audit hours respondents obtained at fixed rates changed.

The survey distinguished between U.S. and international operations by having respondents, which were all U.S.-based, report separately on their domestic and foreign subsidiaries' audits. Whether discussing entities in the U.S. or abroad, the great majority of respondents indicated they didn't buy audit services one at a time but instead agreed to an annual fixed fee for all the audits they required each year.

In 1999, only one out of 31 companies chose not to negotiate a fixed-rate contract for the audit services it needed, compared with 3 of 28 companies in 1997. Since fixed-rate contracts enable audit firms to reduce costs by planning their operations with greater certainty, associated fees generally are lower than they otherwise would be. Companies therefore are eager to agree to such terms whenever possible, as survey responses in each of these years demonstrated.

According to the 1999 survey, audit fees represented .03% of sales domestically and .05% internationally. In 1997, the proportion of audit fees to sales was .03% and .04%, respectively.

The survey also requested feedback from companies on how well auditors' services met their needs. Among companies that supplied such information for 1999, respondents assigned, for both U.S. and international operations, a "4" rating on average to the services they received, with "5" being the highest grade possible. None of the respondents reported a rating lower than "3." FEI said its 1997 survey found identical levels of satisfaction.

The FEI's committee on corporate reporting conducted both surveys, basing its findings on responses it received from its member companies--31 in 1999 and 28 in 1997. Each company retained a major firm as its independent auditor. The 1999 survey results are available at the FEI Web site at www.fei.org.

Small Businesses and the Internet

Megamergers and start-ups create news on Wall Street and in Silicon Valley. But it is on Main Street where change is most profound: Small businesses have gotten into Internet use in a big way.

Percentage of businesses that ...

Use intranet for most of their internal communications.     41%
Communicate with customers via the Internet.                34%
Do the majority of their purchasing over the Internet.      31%
Use the Internet for business documentation including
  agreements, sales contracts and correspondence.           29%
Say the Internet is perceived as more important than
  it really is.                                             65%

Source: Survey of 141 businesses with 100 or fewer employees, Advantage Payroll Services, Auburn, Maine, www.advantagepayroll.com.