Institutional Shareholder Services (ISS) the world’s leading provider of corporate governance and responsible investment solutions has called on shareholders to vote against the appointment of PricewaterhouseCoopers LLP (PwC) at Telford Homes’ AGM on 11 July 2019. The company’s board is recommending PwC be approved as external auditor, a role PwC has fulfilled since 2006.
ISS UK & Ireland Policy states that a negative vote may be considered warranted in instances where the lead audit partner has been linked with a significant auditing controversy at other companies.
ISS says a vote against PwC is warranted because the lead audit partner, Arif Ahmad of PricewaterhouseCoopers LLP, was also the lead partner at Redcentric . Redcentric’s 2016 results had to be heavily revised. Net assets were written down by £ 15.8m to £81.7m, net profits of £5.3m became net losses of £4.2m, the company’s share price slumped by 65% on the news and covenants on the firm’s debt facility were breached although waivers were granted.
PwC and Ahmad himself were fined by the Financial Reporting Council (FRC) and the FRC also noted that failures in the audit of Redcentric were of a basic fundamental nature, evidencing a serious lack of competence. PwC was fined £4.55m and Ahmad personally £140,000.
ISS said: “To be very clear, no concerns have been identified with the Telford Homes plc's accounts,” but added, “…rather concerns are around the effectiveness of the processes in use by the auditors signing off these accounts. It is also worth noting that there is no statement within the annual report over the effectiveness of the external auditors.”