Shareholders have ignored a call by investor activists to abstain from voting to re-appoint auditors at Sage and Paragon despite the high levels of their non-audit fees.

Only 12% didn't vote in favour at the Sage AGM, and under 1% at the Paragon AGM.

PricewaterhouseCoopers earned £1.3m in non-audit fees from technology giant Sage, against £1.5m for the audit, and Deloitte earned £140,000 in non-audit fees, or 34% of the audit fee of £410,000 for mortgage provider Paragon.

‘The vote at Sage indicates that a significant section of investors share our concerns; including abstentions, close to 12% didn’t vote in favour of auditor re-appointment,’ said Tom Powdrill of the Pensions Investment Research Council, which had recommended shareholders of both companies register their disapproval of the levels of non-audit work. Less than 1% voted against or abstained at Paragon.

‘We would rather see auditors focus on the audit; extensive non-audit work will inevitably cause investors to scrutinise the independence of the auditor,’ he added.

‘Because of the potential of a conflict of interest, the financial value of non-audit work may lead to the firm prioritising the retention of the company as a client rather than the veracity of the audit.’

A report out last week revealed 33 instances where European companies had paid more in non-audit fees than audit fees. Company Reporting said 70% were UK listed – including the Alliance & Leicester, which had paid 60% of its total audit fees to Deloitte for tax services in relation to a disposal.

Further reading:

Shareholder revolt call over non-audit fees