Ernst & Young, one of the remaining “big four” accountants, is preparing to increase its audit fees ahead of a jump in the cost of professional indemnity insurance.
Speaking alongside the UK practice's results, chairman Nick Land said: “We will see audit fees going up some way ahead of the current rate of inflation as a result of the cost base and overall risk profile.”
Like Price Waterhouse Coopers, E&Y has been canvassing clients to see if they would be receptive to an increase. “We have been talking to clients and they understand the reasons,” Mr Land said. “What we are beginning to see is companies increasing the assurance they want and increasing the audit scope.”
He added that the cost of professional indemnity is rising following the collapse of Andersen. Mr Land said: “We won't feel it in the short term because of the nature of our arrangements but in the medium term we expect it to go up substantially.”
Audit revenues, which account for about a quarter of income, rose 4pc in the year to June as fee income increased by the same amount to £754m and operating profits fell 13pc to £158m. E&Y's 420 partners took home an average profit of £378,000, compared with £449,000 last year.
Mr Land said prospects for next year remained bleak but 600 redundancies left it in the right shape to improve and corporate recovery continued to provide opportunities.
E&Y also picked up from Andersen audit clients such as Amvescap and FKI in the UK and News Corp and Oracle in the US.
“Clearly Andersen's demise has had some positive impact,” Mr Land said. “But it's not helped the audit brand.”
