Accounting & Tax

Auditors Get a Near-Failing Grade, Say Clients

Survey reveals rating for auditors lags far behind marks for other service providers. Corporate clients say value, not values, the problem.
Stephen TaubApril 12, 2002

Accountants take note: Businesses using outside auditors give your profession an overall grade that is close to failing.

This is the result of an April 2002 survey of companies that purchase outside accounting services, conducted by NFO WorldGroup, a provider of research-based marketing information and counsel.

Using its self-described NFO TRI*M Index, a relationship and reputation management tool, auditors received a score of 61. NFO says that is equivalent to a D. By comparison, general B2B service providers rated an 80 with customers — which is the equivalent of a B. Top-performing businesses with the strongest relationships fall in the range of 90 to 100, which is like receiving an A. There is no curve.

Drive Business Strategy and Growth

Drive Business Strategy and Growth

Learn how NetSuite Financial Management allows you to quickly and easily model what-if scenarios and generate reports.

“This low rating is reflected in client evaluation of auditor performance,” according to NFO. Only 55 percent of the respondents ranked overall performance of their auditor as excellent or very good, compared with the 70 percent to 75 percent typically seen in the professional services, said NFO.

In addition, only 55 percent of respondents said they definitely or probably would recommend their auditors to business colleagues. That compares with 75 percent to 80 percent for the professional-services category.

“These weak scores should be a clear warning bell that the accounting profession has serious, fundamental client relationship problems that are different from the issues dominating the headlines about Andersen and Enron,” says Shubhra Ramchandani, stakeholder management practice leader for North America at NFO, who heads up the TRI*M study. “The problem isn’t integrity — it is value. Most clients rate their outside accountants’ business ethics very highly, but what they question is the performance and value of the services they receive.”

According to the survey’s results, the respondents gave high performance marks to auditors with regard to:

  • “Company I can trust”
  • “Employees that are committed to personal ethics”
  • “Culture of business integrity”
  • Commitment to “maintaining a position of independence as an auditor”

“We’re seeing a clear demand that auditors get back to basics, to shore up their core competencies and concentrate on delivering fundamental value to their corporate clients,” adds Ramchandani. “The accounting industry has concentrated on expanding its portfolio of services, such as consulting and international support. But these do not appear to be what is motivating clients to continue their current external auditor relationships. The crisis of competence will continue to affect the accounting industry long after the big headline controversies become old news.”

Do companies prefer using the same provider for both auditing and consulting? The jury is still out, according to the survey. About a third of the respondents would recommend using their current outside auditor for nonauditing services to their company, while 27 percent would not and 42 percent were unsure or undecided.

No surprise, then, that 50 percent of the companies surveyed said they are currently using auditing and consulting from the same vendor.

The scores are based on NFO’s recent survey of top managers and executives with responsibility for managing auditing and consulting relationships with outside accountants. The results of the survey were compared with NFO’s database comprising results from more than 1,500 studies and 2.6 million interviews across all business sectors.