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Study Explores Countywide Audit Fees

Sept. 24, 2014

Orange County companies undergoing an audit are paying less, on average, than their counterparts in other parts of the country, according to a recent study conducted by Cal State Fullerton's Center for Corporate Reporting and Governance.

The study, using fees charged to 96 companies from 2008 through 2012, found that the median audit fees for county firms decreased from $605,000 to $437,500.

"It is very surprising," said Vivek Mande, center director and professor of accounting, noting that "in magnitude, the average fees in Orange County are lower than the average for all firms nationwide."

Moreover, while the study's authors found that audit fees were closely related to firm size, they found that national auditors of county clients had a decrease in fees "even as their clients' revenues increased."

"Over the same period, the market share of the Big 4 auditors decreased in Orange County," noted Mande. The market share for Deloitte, PricewaterhouseCoopers, Ernst & Young and KPMG auditors among OC firms was about 52 percent in 2008, decreasing to about 45 percent in 2012. The market share of local auditors increased from 32 percent in 2008 to 40 percent in 2012, Mande added.

The study was authored by Mande and assistant directors James Gong, associate professor of accounting, and Myungsoo Son, professor of accounting.

The Center for Corporate Reporting and Governance was established in 2003 within the Mihaylo College of Business and Economics to address corporate reporting and governance issues facing companies and their auditors. It trains and educates corporate boards, accounting professionals and investors on topics related to ethics, accountability, financial reporting and governance, and is also is registered with the National Association of State Boards of Accountancy.

Copies of the report are available at the Center for Corporate Reporting and Governance, Room 4313 of Mihaylo Hall; 657-278-4414.

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