Typical audit fees during 2009 were approximately one-tenth of total legal fees

The NY Times, Oct. 28, 2011 at B2, reports that in 2009 audit fees averaged $569,000 per billion dollars of revenue. For U.S. companies that year, what they spent on their law department and outside counsel averaged something like $5 million per billion of revenue – on the order of ten times more. I know nothing about the benefits to a company of audits of its books, but the legal value delivered seems much higher than that ratio.

The same item mentioned that in the years after Sarbanes-Oxley, a statute that many cite as the epitome of increased regulatory burden, audit fees starting trending down. Wouldn’t complexity, globalization, and technology – the trio of forces often cited as increasing demands on law departments – have increased demands for accounting services and therefore have stabilized or increased fees?

Finally, if you are in a U.S. law department of three or more lawyers, the odds are very high that one of only four accounting firms audit your company and assess your litigation reserves. Of American companies with revenues over $1 billion (and I used a typical ratio of three or so lawyers per billion), 98 percent have their books scoured by Deloitte & Touche, Ernst & Young, KPMG or PricewaterhouseCoopers.

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