Investec shareholders revolt over plan to keep KPMG as auditor

SOUTH African bank Investec suffered a shareholder revolt against its decision to reappoint KPMG as its auditor, following a spate of scandals at the Big Four accountancy giant which have seen it haemorrhage clients.

Just under 20pc of Investec’s voting shareholders rejected the resolution to stick with KPMG as one of its auditors. In response to the revolt, Investec said it had “spent a lot of time during the course of the year on matters pertaining to audit quality and auditor independence”, and its decision to retain KPMG “was not taken lightly”.

“The board is concerned about the failures of KPMG’S internal controls and procedures as acknowledged by them. Of greater concern is the significant negative impact this has had on the country’s audit profession, individual lives and the South African economy,” Investec said.

The bank said it would continue to “monitor the situation carefully and demand that the quality of work performed by KPMG for the group is of a high standard”.

KPMG has been wrestling to restore its reputation in South Africa, clearing out its management team in the country and closing a number of offices, after becoming embroiled in a scandal linked to the billionaire Gupta family and following criticism over its audit of collapsed bank VBS.

KPMG was banned from conducting government work in the country in April, with South Africa’s attorney general, Kimi Makwetu, saying that “recent media reports relating to the external audit of VBS and the conduct of KPMG audit partners are some of the reasons that prompted the decision”.

A flurry of South African clients have dumped KPMG following the controversies. Data released at the end of last week showed it had lost 20 listed audit clients since the start of 2017.

KPMG had responded by saying it “expected to see a reduction in the number of clients as a result of the impact of mandatory audit firm rotation. We also lost a few clients as a result of the issues faced over the past year.”

It has also come under fire in the UK, from the accounting watchdog for the “unacceptable deterioration” in the quality of its audits in June.

The Financial Reporting Council had found that 50pc of KPMG’S audits of companies listed on the FTSE 350 required more than limited improvements in the most recent financial year.