It did not lightly decide to keep KPMG on as its joint auditors, Investec said this week, but in the end even the firms acknowledged failures did not outweigh the broader needs of the South African financial system.
At its annual general meeting on Wednesday, just under 20% of the vote was against Investec's proposal to reappoint KPMG, jointly with Ernst & Young, as the bank's auditors. In response Investec issued an unusual, detailed explanation for its board's decision to not follow others in dumping the troubled firm.
The board and its audit committee had taken into consideration "requirements with respect to joint auditors and mandatory firm rotation", Investec said, though it is not clear how this relates to a firm that has helped audit it's books for well over a decade.
"In addition, the need to ensure stability within the South African financial system and the audit profession at a time of uncertainty and volatility in the country as a whole is important," it said.
This outweighed "the failures of KPMG's internal controls and procedures as acknowledged by them", as well as "the significant negative impact" KPMG's behaviour has had on the auditing profession, individuals, and the SA economy.
"Investec is a company that is strongly committed to its core values which require Investec employees, clients, suppliers and service providers to uphold the highest standards of ethical behaviour," it told shareholders.
The Independent Regulatory Board for Auditors (Irba) has said KPMG was responsible for an "unprecedented crisis", and an inquiry has heard that KPMG had failed to act in an independent and objective fashion in its dealings with the SA Revenue Service (Sars).
In October last year Investec said it was unhappy about "events that have occurred at KPMG", and said KPMG had taken too long to disclose information and to fully disclose "matters of public concern".
In April KPMG suspended a senior partner involved in its auditors of VBS Mutual Bank, then kept it secret for two weeks.
Investec suggested that some major shareholders actually understood its position on KPMG, but voted against the firm's reappointment nonetheless because of "their own internal policies".
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