The UK’s largest 500 firms experienced a significant rise in audit expenses this year, amounting to a historic £1.45 billion, with accounting firms elevating their fees to account for the additional workload their personnel now face.

HSBC continues to hold the title for the most valuable audit contract in the UK, paying £88 million to PwC, a rise from £78 million in 2023. Following closely are Shell and BP, with audit fees of £51 million and £45 million respectively.

According to analytics firm Thomson Reuters, the top 500 companies in Britain have seen an average audit fee spike of 14 percent this year, following a previous increase of 13 percent last year.

“More extensive auditing procedures, including heightened testing measures and increased resource allocation for audit teams, have contributed to the escalation in audit costs,” explained Kyle Gibbons, head of global accounts at Thomson Reuters Confirmation.

A series of high-profile corporate failures, such as that of the café chain Patisserie Valerie and construction giant Carillion, have placed the audit sector under intense scrutiny.

The Financial Reporting Council (FRC), which oversees the industry, has tightened its regulations and imposed record fines to ensure auditors meet high performance standards.

In response to this elevated scrutiny, auditors are dedicating more time and resources to examining company financials. Senior partners in some firms indicate that the workload has increased by approximately 40 percent compared to levels a decade ago.

Traditionally, audits served as a foundation for building relationships with clients, often carried out with minimal profit, with firms aspiring to secure more lucrative advisory contracts as a secondary benefit.

However, regulatory shifts have now made those arrangements challenging due to conflict of interest concerns, mandating that audit divisions operate independently, which has also contributed to rising fees.

The persistence of double-digit fee increases is likely to be met with dissatisfaction by clients. Finance executives have previously urged the Big Four — Deloitte, EY, KPMG, and PwC — to lower their charges.

There is speculation among clients that accounting firms may be raising their fees to compensate for a slowdown in their consulting divisions. For years, growth in audit revenues lagged behind consulting, but this trend has reversed, causing companies to tighten their advisory budgets. Despite this, audit services remain indispensable. The FRC has communicated its stance that auditors should avoid price reductions “if it undermines audit quality.”

Gibbons suggested that the pace of audit fee increases is unsustainable, a sentiment echoed among auditing partners. Consequently, firms are investing heavily in artificial intelligence, aiming to streamline the process of verifying company accounts and make it less burdensome.