Shareholders ignore call for revolt on non-audit fees

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

PricewaterhouseCoopers earned £1.3m in
non-audit fees from technology giant Sage, against £1.5m for the audit, and
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:

revolt call over non-audit fees

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