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

By extending the level of assurance obtained alongside the external audit
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

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