A third of executives that retendered their audit work around two years ago were not satisfied with their auditor, and are now suffering from what the report calls the ‘mid-term blues’, found Source Global Research.

Half (51%) had put their audit out to tender within the last year while two thirds (64%) had plans to tender the audit within the next 12 months.

In its analysis, Source says nine out of 10 organisations that have not gone through a formal process to put their audit out to tender within the last five years are satisfied, a number that rises to 100% among the very small number of organisations that have not done this for longer.

Only a third (32%) of those who had retendered their audit within the last twelve months were satisfied.

The report states: ‘When an audit is retendered, a brief honeymoon period gives way to greater levels of dissatisfaction - a period that we call the “mid-term blues”.’

The report suggests that as audit rotation increases, the percentage of clients falling into the ‘mid-term blues’ period will also increase - and this will create a vicious circle in which clients put their audit out to tender more frequently, but become increasingly dissatisfied.

Source says if the average audit relationship extends over a 25-year period, then (assuming an equal number of clients fall into each of the 25 years), just 4% of clients fall into the ‘mid-term blues’.

Edward Haigh, director of Source Global Research said: ‘The irony here is that changing auditor is designed to increase client satisfaction, but our research shows that more frequent tendering of the audit will actually reduce it.

‘It will also lead to more scepticism about value because it makes it harder for firms to move into a long-term, stable relationship in which clients’ views are positive because their needs are being met.’

The research also found that half (48%) of companies say their external auditor adds value, but the same proportion (50%) say that the value added is in line with fees — so audit is seen purely as a transaction rather than a value-added activity.

Satisfied clients presently rank reputation as the most important factor determining their choice of audit firm. However, the report finds that three quarters of dissatisfied clients say they will put value for money top of their agenda when choosing their next audit firm.

This may become a major issue for UK firms, as Accountancy’s FTSE 250 Auditors Survey 2017 found that one in four (26%) of accounting firms hiked their fees in the second year of a new audit engagement, in some cases by as much as 25%.

Source Global Research’s report is based on a survey of senior executives in 200 US corporations. Almost three quarters (70%) were from firms that employed more than 5,000 people.