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The Daily

Nonaudit Service Spending Withers Compared to Audit Expenses

Chris Gaetano
Published Date:
Aug 28, 2015
small sockWhere at the turn of the 21st century they were about 50-50, since then business spending on non-audit accounting services has significantly shrunk while audit spending, in turn, has grown dramatically, according to the Wall Street Journal. It said that, in 2014, 80 percent of spending among 2,300 public companies in the U.S. was devoted specifically to commercial audit services, a figure that jumps to 91 percent when factoring in other types of audit services such as benefit plan audits, merger evaluations and internal control reviews. At this point, non-audit accounting service spending is at its lowest point since 2002, said the Journal, when the Enron scandal spotlighted concerns about the independence of firms that audited public companies while also receiving hefty fees from them for other services. Such spending dropped in the wake of the Sarbanes-Oxley Act, which introduced new rules that banned independent auditors from several non-audit activities like bookkeeping, actuarial services and management functions, as well as increased the standards for what counted as arms' length, said the Journal.