Rentokil defends right to make non-audit decisions

Rentokil Initial, the company which sparked an industry-wide debate about
auditor independence, has defended its right to makes its own decisions about
what work its auditor undertakes.

The FTSE 100 firm said it was not in favour of further restrictions on its
ability to “exercise judgment over non-audit engagements”.

“Additional controls or prohibitions in this area would in the board’s view
remove an element of the company’s ability to manage its business affairs for no
particular enhancement to the governance process,” the board said in response to
the Auditing Practices Board consultation on non-audit services..

Rentokil sparked debate across the audit industry when it switched auditor

from industry heavyweight PricewaterhouseCoopers to KPMG, in July 2008.

KPMG controversially won the audit with a cut-price package which fulfilled
all the functions of an external audit, while performing tasks usually performed
by internal auditors.

The package shaved 30% off Rentokil’s audit costs, but raised questions about
a potential breach of ethical standards.

In November, FRC admitted it was looking into the issue and urged caution for
any companies interested in the arrangement.

KPMG has consistently defended the audit, with UK head of audit Oliver Tant
commenting in November that the arrangement “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,” he said.

Further reading:

audit head defends controversial Rentokil role

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