PracticeAuditAdmiral boss gives backing to KPMG audit service mix

Admiral boss gives backing to KPMG audit service mix

Costs savings and value added in external auditors working on internal audit too

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.

More:

FRC urges caution on Rentokil-style audits

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