Audit fees growth lags corporate expansion in India
Audit fees for Nifty 500 companies increased by a modest 28% between 2018 and 2023, indicating that they have lagged behind their growth and operational performance, as market capitalisation grew 92.75%, net sales rose 83.7%, and profit after tax (PAT) increased 126.2%. According to data provided by Prime Database, audit fees grew from ₹1,114 crore in FY18 to ₹1,430 crore in FY23 for Nifty 500 companies and from ₹404 crore to ₹466 crore for Nifty 50 companies.
While the audit fee hike is marginal, the sharply increasing complexity in business operations, heightened regulatory oversight on listed companies, growing complexity in reporting requirements, and escalating talent and organisation costs every year are putting auditors in a tough spot.
And one of the key reasons why auditors are not in a position to demand an adequate fee has been the Companies Law-mandated audit rotation every five years. Audit committees and CFOs leverage the competitiveness between the firms to keep fee hikes low. Simultaneously, companies are imposing tighter deadlines on auditors to complete reporting processes, exacerbating costs and work pressure.
Sanjeev Krishan, chairperson of PwC India, says that at a time Indian businesses face the dual challenge of managing intricate regulatory landscapes and navigating disruptions to create stakeholder outcomes, trust becomes paramount. «If trust underpins all organisational actions leading to larger outcomes, it should command a premium,» he said.
Even NFRA chairman Ajay Bhushan Pandey
