• Register
Return to: Home > News > South African shareholders are increasingly voting against the reappointment of auditors

South African shareholders are increasingly voting against the reappointment of auditors

Twenty seven percent of annual general meetings (AGMs) resolutions surveyed by the South African regulator, the Independent Regulatory Board for Auditors (IRBA), recorded significant increase in vote opposing auditors reappointment. This is particularly the case for companies where the auditor’s tenure is excessively long, IRBA noted.

Since announcing in June of this year that mandatory audit firm rotation would be a requirement from 2023, IRBA has been tracking the results of shareholders' vote at AGMs with respect to the reappointment of auditors.

IRBA CEO Bernard Agulhas said: “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.”

Of the 102 auditor appointment resolutions tabled at AGMs since November 2016, 51 recorded an increase in opposition; of these, 24 resulted in significant shareholder opposition to the auditor’s reappointment, according to Agulhas.

The most significant opposition recorded an increase of up to 40% year on year in the votes against the reappointment of auditors, he continued. “The most recent annual general meetings to be subject to this increased shareholder opposition were Telkom and PPC Ltd, which reflected 23% and 14% increases in the no vote. While such an increase may seem insignificant in some instances, it indicates to us that even minority shareholders are finding their voice.”

IRBA’s collected data showed that of the 24 resolutions that recorded an increase in the vote against the reappointment of auditors, only three had previously recorded an opposing vote above 1% (but less than 10%), the remainder had seen shareholders almost unanimously adopt the recommendation of the audit committee at the preceding AGM (see table below).

Since December 2015, audit firm in South Africa have to disclose the length of tenure of an audit in the independent auditor’s report to shareholders to be compliant with a regulation passed by IRBA. And the regulator sees the recent highlighted trends in shareholders' vote as a direct consequence of this regulation.

“As a first step, we are satisfied that the rule to disclose tenure of audit has served the purpose of highlighting excessively long relationships between companies and their auditors,” Agulhas concluded. “However, there is still more shareholder education to be done, as it is the shareholder – and not the management of the company - who is the auditor’s real client.”

Top Content

    Brexit negotiations: Making simple complicated

    Stepping away from the politics, ACCA UK head John Williams talks about the practical implications of Brexit for businesses’ supply chains and how the accountancy profession’s pragmatism could be a welcome. But, when it comes to Brexit, by its very nature, the politics can’t stay away for too long. Interview by Vincent Huck.

    read more

    TA & IAB 2017 Awards: Prem Sikka granted the Editor's award

    Accounting professor Prem Sikka will receive a special editor’s award from The Accountant and International Accounting Bulletin at a one-day conference and awards dinner in London on 4 October

    read more

    Australia country survey: scandals and struggles

    CPA Australia hit the headlines over excessive pay, bad management, intimidation, and a ‘celebrity’ CEO departing with a generous payoff. After a parliamentary inquiry and an independent review due to report, can determined members get the CPA they want? Tom Ravlic reports

    read more

    Technical brief: Kazakhstan

    To what extent has Kazakhstan acted on the world bank’s recomendations from a decade ago?

    read more
Privacy Policy

We have updated our privacy policy. In the latest update it explains what cookies are and how we use them on our site. To learn more about cookies and their benefits, please view our privacy policy. Please be aware that parts of this site will not function correctly if you disable cookies. By continuing to use this site, you consent to our use of cookies in accordance with our privacy policy unless you have disabled them.