Most businesses in South Africa ask the same question when they hear the word “audit”: “What is this actually going to cost us?” Audit fees are not one-size-fits-all. They depend on the size, complexity and risk profile of the engagement, as well as the work effort required to perform a quality audit.
This article explains the main factors that influence audit fees so you can understand how quotes are put together and what you can do to manage costs without compromising quality.
1. There is no single “standard audit fee”
An audit fee is the remuneration charged by auditors for the time and expertise needed to perform an audit in accordance with the applicable standards.
In practice:
- Audit fees are usually based on the expected hours at different staff levels, multiplied by charge-out rates, and adjusted for complexity and risk.
- Fees should be sufficient to allow auditors to perform the necessary work and maintain audit quality.
- Reasonable fees support the auditor’s ability to obtain appropriate evidence and issue a reliable opinion.
This is why two entities of similar size can still receive different quotes: the underlying work effort is not identical.
2. Six factors that drive your audit fee
1) Size of your business and transaction volume
Client size is one of the most important determinants of audit fees.
In practical terms:
- Larger entities tend to have more transactions, accounts and systems to audit.
- Higher revenue, more assets and more staff usually translate into more work across areas such as revenue, inventory, receivables, payables and payroll.
- Even within SMEs, fast-growing businesses often require more audit effort than very small, simple entities.
The fee usually moves in line with the audit hours required to cover all relevant areas at an appropriate level of depth.
2) Complexity of your structure and operations
Beyond sheer size, complexity is another major factor.
Complexity can come from:
- Multiple entities or subsidiaries, group structures and consolidations.
- Operations in more than one location or business line.
- Significant estimates and judgments, for example impairment, provisions or fair value measurements.
- Specialised industries with specific regulatory or reporting requirements.
Higher complexity typically requires more senior involvement, more planning and more procedures, which increases the overall effort.
3) Quality of your accounting records and reconciliations
The state of the client’s records and internal processes affects audit effort and, therefore, fees.
In practice:
- Well-maintained records, timely reconciliations and clear audit trails make it easier for auditors to obtain evidence.
- Missing documentation, late adjustments and unresolved differences can require additional work to resolve before the audit procedures can even start.
- Frequent year-end “clean-up” work outside agreed scope may lead to discussions about additional fees.
This is one area where management can directly influence future fees by improving record-keeping and internal processes.
4) Strength of internal controls and risk profile
Assessed audit risk and the quality of internal controls are important determinants of audit fees.
From an audit planning perspective:
- Strong, well-designed and implemented controls can allow auditors to place some reliance on those controls, potentially reducing the need for extensive detailed testing in certain areas.
- Weak or poorly documented controls, significant fraud risk or a history of misstatements often mean more substantive work and more hours.
- Entities operating in higher-risk environments or with complex IT systems may require specialist input.
The aim is not to “penalise” risk, but to ensure that the level of work matches the risk profile.
5) Reporting frameworks and regulatory environment
Different reporting frameworks and regulatory contexts can also have an impact.
Examples include:
- Entities preparing financial statements under more complex frameworks may require additional technical work.
- Regulated sectors may have additional reporting or compliance requirements.
- Audits performed on behalf of certain public bodies are sometimes subject to specific fee guidelines or charge-out structures.
These factors influence both the amount and the nature of audit work.
6) Timing, deadlines and other practical considerations
Timing and practical constraints can also influence pricing.
In practice:
- Very tight deadlines or audits scheduled in peak season may require increased staffing or overtime.
- Requests for significant scope changes or additional reporting after the engagement has been planned can increase work effort.
- In some cases, audits that involve extensive travel or work across many locations can have different cost profiles.
Clarifying timing and expectations upfront helps keep fees aligned with the initial quote.
3. How auditors typically build an audit fee
While each firm has its own approach, the process is broadly similar.
Step 1: Assess the engagement
- Understand the entity’s size, complexity, risk profile, reporting framework and regulatory context.
- Consider whether specialists or additional resources are required.
Step 2: Estimate hours by staff level
- Plan expected hours for partners, managers and staff based on prior experience and the upcoming year’s circumstances.
- Factor in planning, fieldwork, supervision, review and reporting.
Step 3: Apply charge-out rates
- Use internal charge-out rates that reflect the cost of staff and partners, as well as overheads needed to maintain quality and compliance.
Step 4: Discuss scope and assumptions with the client
- Explain what is included in the fee and what assumptions it is based on.
- Agree how additional work, if needed, will be handled.
This process is intended to link the fee directly to the work needed to perform a quality audit.
4. How your business can help manage audit costs responsibly
Without undercutting quality, there are practical steps businesses can take to help keep audit fees under control:
- Maintain good records throughout the year
Keep invoices, contracts, bank statements and supporting documents organised, and perform reconciliations regularly. - Address known issues early
Discuss unusual transactions, new funding structures or major changes with your auditor ahead of year-end so they can be planned properly. - Agree scope and timelines clearly
Confirm what is included in the fee, when information will be ready and how long fieldwork will take, and avoid compressing timelines unnecessarily. - Use management letters constructively
Work through prior-year recommendations on controls and processes to reduce risk and, over time, audit effort.
These steps also tend to improve the quality of internal information, which benefits management beyond the audit.
5. Why “too cheap” can be risky
Fees must be sufficient to support the work required to issue a quality audit report.
If a fee is significantly lower than what would be expected given your size, complexity and risk profile, it is important to:
- Ask how the firm plans to cover all required areas within that budget.
- Confirm that the work will still be performed in line with the applicable auditing standards.
- Understand whether the quote is based on realistic assumptions about the state of your records and controls.
The goal is not to suggest that higher fees always mean higher quality, but to recognise that quality audits require adequate time and resources.
6. Getting an audit quote that fits your situation
When you request an audit proposal, you can help the process by providing:
- A brief description of your business and activities.
- Recent financial statements or management accounts.
- Information about group structures, locations and key systems.
- Any regulatory or stakeholder requirements that may affect the engagement.
This allows the auditor to tailor the scope and fee to your circumstances and to explain how each of the factors above influences the quote in your case.
Frequently asked questions
Is there a typical audit fee range for small businesses?
There is no single standard fee because audit pricing depends on size, complexity, risk and work effort. Similar-sized entities can have different fees if their structures, records or risk profiles differ.
Do auditors charge by the hour or a fixed fee?
Many firms use a fixed fee based on estimated hours at different staff levels, while others may use hourly billing or a hybrid. In all cases, the fee should reflect the work needed to perform a quality audit.
Can our audit fee go down over time?
In some cases, fees may stabilise or decrease if the business becomes more efficient, records improve and prior-year issues are resolved. Major growth, complexity or new requirements can have the opposite effect.
Is it risky to choose the lowest audit quote?
A low fee is not necessarily a problem, but it is sensible to understand how the firm will carry out the required work within that budget. Quality audits require sufficient time and resources.