Votes against retaining auditors are on the rise, says the Independent Regulatory Board for Auditors.
The Independent Regulatory Board for Auditors believes it is making progress in raising shareholder support for the mandatory rotation of audit firms, which becomes effective in 2023.
The regulatory body said Telkom and cement company PPC were two recent high-profile instances of shareholders becoming more engaged in the mandatory rotation issue, with significant increases in the no vote at the annual general meetings (AGMs) of both.
“A visible trend towards voting against the reappointment of auditors is developing, with 27% of surveyed companies increasing their votes against the reappointment of auditors by up to 40%,” said Bernard Agulhas, the CEO of the regulatory body. He said the likelihood of a vote against reappointment was particularly high when the audit firm’s tenure was excessively long.
Since December 2015 audit firms have been required to disclose in the independent auditor’s report how long they have been the auditors. This ensured shareholders were aware of tenures, which frequently run to several decades.
“What is clear is that the shareholders are beginning to make their voice heard at AGMs regarding the necessity for firm rotation to end excessively long relationships. Where audit committees may feel a 20-year, 50-year or longer relationship might not impair auditor independence, shareholders are saying otherwise,” Agulhas said.
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