Rentokil audit - All their own work

Companies are facing unprecedented challenges in this economic climate. That is why KPMG has developed a new, extended assurance proposition which has certainly captured the market’s attention.

At the heart of the proposition is the fact that companies are looking for greater assurance as they seek to control, mitigate and minimise risks. This is an objective relevant for shareholders and other stakeholders, as those charged with corporate governance responsibility seek to reassure stakeholders where uncertainty has led to a loss of confidence.

Under the service, those responsible for corporate governance may ask KPMG to perform work beyond that which is required for the statutory audit, for example by testing a larger sample of controls or additional transactions and balances of lower value than the materiality level set for the statutory audit.

This work does not replace, conflict with or undermine the independence of the external audit ­ it simply extends our understanding of the business and its controls and hence the breadth and depth of insight we can offer. That is why we call it extended assurance.

As well as delivering greater and deeper insight, the service also improves efficiency by reducing duplication of effort, giving the potential to reduce costs.

By extending the level of assurance obtained alongside the external audit process,
those responsible for corporate governance are able to evaluate the need for other work, including internal audit procedures covering the same areas.

Let me also be clear what the service is not, because some reports on this have been somewhat misleading.

The service is not about merging the external and internal audit functions. A company can continue to have its own internal audit function and those charged with corporate governance will still be responsible for assessing the overall adequacy of a company’s control environment and the need for skilled internal audit expertise.

KPMG will not take on the role of management, or take management decisions on the company’s behalf.

Ethical standards do not prevent the auditor from doing more than the bare minimum to support the audit opinion. We will identify and plan the work necessary to support our audit opinion independent of any further work we may be requested to perform.

We believe it is important to provide further assurance to those responsible for corporate governance, where this is requested.

At a time when the management of risk is at the top of companies’ agendas, the service is simply designed to meet that imperative and provide the highest quality of audit and assurance possible ­ surely a positive move and a sign of an audit firm responding to the needs of clients.

Oliver Tant, UK head of audit, KPMG

Further reading

KPMG audit head defends controversial Rentokil role