Investec gears for auditor rotations
Investec is engaging with various industry bodies to prepare for 2023 when listed companies will no longer be able to reappoint an audit firm that has served it for more than 10 consecutive years.
Investec is engaging with various industry bodies to prepare for 2023 when listed companies will no longer be able to reappoint an audit firm that has served it for more than 10 consecutive years.
Investec is the latest company listed on the JSE to register a substantial vote against the reappointment of its auditors, with the controversy-dogged KPMG notching up about 20% shareholder opposition to its reappointment. The Independent Regulatory Board for Auditors (Irba), which imposed the 2023 cut-off, said voting at Investec’s annual general meeting (AGM) was in line with growing trends in the country.
Since January 2017, when Irba started tracking audit firm rotations, 12% of JSE-listed firms have changed theirs.
Irba CEO Bernard Agulhas said it was encouraging that one-third of those cited mandatory audit firm rotation as the reason for the change.
He said if the pace continued, “we could ultimately see as much as 74% of JSE audits having rotated by 2020”.
Investec was considering a number of issues as it prepared for the implementation of Irba’s mandatory rotation, said spokeswoman Ursula Nobrega.
“Whether the SA Reserve Bank will continue to require banks to have two auditors and what nonaudit work is being done by various audit firms on nonaudit matters” were some of the issues being considered by the company.
At last week’s Investec AGM, 19.5% of shareholders voted against KPMG’s reappointment as joint auditor and 14% were against that of EY. At the 2017 AGM, 88% voted against the reappointment of both.
The Public Investment Corporation (PIC), which holds 12.2% of Investec, said in 2017 it had voted against the two firms because they had served for more than 10 years.
“The PIC policy supports external auditors’ rotation every 10 years … to ensure independence,” said its proxy report.
The PIC did not respond to a request for comment on the latest AGM.
While the vote against both audit firms must be seen in the context of growing awareness of the need for audit firm independence, the larger vote against KPMG is seen as part of the backlash against its controversial ties with the Guptas.
In a note to shareholders after the meeting, Investec said, “The board’s decision to retain KPMG as one of the group’s joint auditors in SA was not taken lightly. The board is concerned about the failures of KPMG’s internal controls and procedures as acknowledged by them.” Investec said a greater concern was the significant negative effect this has had on the audit profession, individual lives and the South African economy.
It referred to the need to ensure stability within the SA financial system and the audit profession at a time of “volatility in the country as a whole”.