Admiral boss gives backing to KPMG audit service mix

The controversial external and internal audit service mix proffered to Rentokil by KPMG has caught the eye of more than just the regulators and rivals - other FTSE 100 senior finance professionals are interested in finding out more.

In an exclusive interview for Accountancy Age Kevin Chidwick, FD of FTSE 100 car insurer Admiral Group, said he has asked the firm, Admiral's current auditor, for more details about the offering as he could see the potential for a service that lowered audit fees.

The service has stoked concerns that it would be risky for an auditor to review its own internal work and that the close relationship could directly shape management decisions.

However Chidwick said: "I can understand why it would be potentially controversial, but they do bring a lot of skills into the internal audit area particularly around technical parts such as IT internal audit.

"If they can add value to what we're doing, and overall it somehow [can be] combined to keep down external audit costs, I'm all for it."

He said that it was important for KPMG to keep the internal role separate from their external position.

"I want to understand how it would work, how they would keep the clear delineation between the external audit scrutiny and outsourced internal audit work. I don't see a problem with it as long as there isn't contamination of their role as external auditors."

While the Institute of Internal Auditors would not comment on the actions of individuals or other companies, IIA president Dr Sarah Blackburn said: " Internal auditors with specialist skills, including IT auditors, are readily available from a range of external providers.

"It is the institute's position that in order to ensure the highest standards of corporate governance a professional internal audit team should report to a head of internal audit, or equivalent, who works independently from the external audit provider."

KPMG's UK head of audit Oliver Tant had previously penned a strident defence of the firm's service, after competitors said they would not offer the same arrangement and regulators are keeping a close eye on developments.

"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," said Tant in his Accountancy Age article.

KPMG had won the audit of Rentokil from PwC, with the services company announcing it had shaved 30% off its audit costs as part of the deal. The firm would not comment about individual clients.

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