There’s consensus among business people who are required to order an audit, review or other audit engagement: it is hard to find an auditor and the prices of audit services have risen significantly.
Those who have their own auditor hold on to them for dear life. Many are reporting that queries sent out to dozens of auditors sometimes do not yield a single response and companies have had to contact the Auditors’ Association with a request to finds one. Of course, there’s not much the association can do but steer the person to the public list of auditors on the association’s website.
There are several reasons that this situation has arisen: reasons beyond the control of clients and auditors – external reasons – and also causes related to audit activity.
The biggest external cause of the rise in audit fees and the shortage of auditors is, naturally, inflation. According to auditors’ management report statistics, the average audit fee is about 20% higher than it was for auditing 2021 annual reports. The price rise is even higher for review: an average of 22%. The price rise is highest in case of medium-sized audit firms and lowest for small audit firms.
But how does inflation cause a shortage of auditors? Peaking at 25%, inflation swelled asset volume and income by double digit percentage and caused many companies to require an audit or review for the first time. But inflation did not bring any new auditors to the trade and thus the balance of supply and demand changed on the audit market.
The reasons for the shortage of auditors and for the higher price of audit service caused by auditors activities are related to additional regulations that have become obligatory for auditors. That means it takes more time for auditors to provide service. Regulation of professional audit activity has become stricter and auditors who fail to follow to the rules are forced to cease activity.
Although the profession has been a popular choice for recent graduates, the trend for the last 12-month period is negative. From 1 July 2022 to 30 June 2023, 11 new sworn auditors entered practice and 17 sworn auditors left – a balance of – 6 for the year. The situation with audit firms is even worse: over a year, two new activity licences were issued and 14 were revoked, for a balance of – 12 over the year. As of 30 June 2023, 116 audit firms have an activity licence, meaning that the number of audit firms decreased by about 10% over the year.
The average sworn auditor’s age has also quietly increased, and it is now 48 years. The youngest auditor is 26 and the oldest is 83. There are 12 sworn auditors over the age of 70. Two-thirds of auditors are women. While there are relatively many sworn auditors in Estonia (341 as of 30 June 2023), many of them do not work as auditors.
Although the Auditors’ Association and auditors are involved in popularising the profession, the number of young auditors is not expected to grow rapidly, because becoming a sworn auditor requires both a university degree and three years working experience at a practising auditor and passing an examination consisting of eight modules. It is estimated that each year over 100 young auditors begin work at audit firms, but only a few of them get certified as sworn auditors. That is to be expected, because young people are still deciding on their profession and career and working as an auditor’s assistant constitutes very good training and wide range of experiences. That makes young people working for audit firms attractive for other employers and we should not expect a major new wave of auditors even though there would be market demand for them.
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