The number of those resigning reached a total of 229 in the 12 months to September, from 190 the year before, new data from Thomson Reuters reveals.

The increase comes as audit firms face pressure from the accountancy regulator to drop unprofitable clients from their portfolio.

The Financial Reporting Council (FRC) has called on audit companies to increase fees for audit work and reduce the risk of this work being used as a loss leader.

Audit firms have previously been accused of using loss-making audits to make client relationships and attract them to use the auditor for more profitable work, such as consultancy and tax works.

In November 2019, the new chief of the FRC, Simon Dinegamns, blamed cross-subsidisation of audit with other services and audit’s usage as a loss leader for the drop in the quality of audit work.

Brian Peccarelli, chief operating officer for customer segments at Thomson Reuters, said: “It seems that audit firms are now looking far more closely at which clients they want to work for.”

The auditing profession is facing increased scrutiny and is bracing for reform as the Competition and Markets Authority (CMA) called for the break-up of the ‘Big Four’ auditing companies last year.

In response to regulatory pressure to improve audit standards, audit firms are introducing more checks and an even higher level of scrutiny in audits. This extra work is leading to a pressure on fees especially at those already loss-making clients – leading to more audit resignations.

Mr Peccarelli continued: “Audit firms have responded to regulatory pressure and are now pouring far more time and resources into audits. Doing this has an obvious impact on costs. They are also investing heavily in AI, big data and other technology in order to improve audit quality and keep costs under control.

“However, there is an increasing acceptance amongst regulators and the profession that audits must be properly charged for. With the FRC increasing the level of fines it imposes on audit firms it is also understandable that audit firms will want to review their relationships with ‘high risk’ clients.”

Thomson Reuters highlighted that the number of firms resigning from audits is rising again after having been steadily declining from a peak of 367 in 2014/15. That previous peak in auditor resignations came at a time when the rules over the mandatory retendering of audits for FTSE350 companies every 10 years were reinforced. More recently the EU has introduced rules that require the mandatory rotation of audit firms for public interest entities.