Picture: THINKSTOCK
Picture: THINKSTOCK

Shareholders at Aspen Pharmacare voted in significant numbers against the reappointment of its external auditors in a move suggesting growing concern about auditor independence.

It is the second large listed company in the past week to record a significant change in the pattern of voting on auditor reappointment at annual general meetings. The changing attitude comes in the wake of a controversial proposal by the Independent Regulatory Board for Auditors (IRBA) that companies be required to change their external audit firms every 10 years.

At Aspen’s meeting on Tuesday, 14.4% of shareholders voted against the reappointment of PwC, which has audited Aspen’s accounts since it was founded 19 years ago. While the 14.4% falls far short of the 50% needed to block PwC’s reappointment, it represents a significant change from previous years, when the resolution was guaranteed 99.9% support. In 2015, the reappointment resolution received backing from 99.98% of shareholders in attendance.

Last week, 18.6% of Woolworths’ shareholders voted against the reappointment of its auditors, EY.

Given its role as an active shareholder, the voting in both instances could be attributable to the Public Investment Corporation (PIC), the largest single investor on the JSE. The PIC did not respond to requests for comment and to date has not changed its proxy voting policy to address the issue of mandatory auditor rotation.

The IRBA described the change in voting pattern as a "very positive development". IRBA CEO Bernard Agulhas said the proposal to introduce a rule making auditor rotation mandatory had increased public discussion and raised awareness about the independence of auditors. As it stands, ahead of the response to public comments, the rule requires any company that has had the same auditor for more than 10 years to appoint a new auditor. The rule is to come into effect in 2023.

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