FSA regulation blamed for up to 44% increase in accountants' costs

Brokers could face higher charges for their annual audits as a result of FSA regulation.

Broker Carl Woodruffe, director with charity specialist brokers MCIS, says his firm was stung with a 44% increase for its annual audit fee that was put down to the impact of regulation by his auditor.

"Our financial year end was February 2005 and we will be among the first to experience the effect of the FSA regime. I have asked our auditor to explain how it could possibly justify such an increase."

Woodruffe said subsequent negotiations with his auditor, which he did not wish to name, has secured an acceptable reduction in the bill.

Mark Grice, head of accountant Mazar's broking group, said: "As a result of the application for regulation there will probably have been a number of system changes within a firm which might result in increased work in the year of change and therefore increased fees."

He added that the fact that a business was regulated - and therefore more open to scrutiny by an outsider - might influence the level of risk an auditor was willing to accept. This could mean a greater cost to cover the risk.

Grice said that rising PI costs for auditors were also set to have an impact on fees levied.

But, an FSA spokesman denied that regulation would mean a rise in auditing charges. "Regulation should not make a difference since nothing changes under company law. But, if brokers feel a firm is trying it on, they should take it up with them."