The UK's Financial Reporting Council (FRC) has warned against companies signing up for "bundled audits" pending completion of a review into the ethical questions surrounding their use.

As we reported in August, the downturn has encouraged the development of a new type of audit which blends internal and external audit. Rentokil claims to have achieved a 30% saving by going down this route, however, Paul Boyle, Chief Executive of the FRC, has warned companies not to rush into these controversial arrangements.

Bundled audits are not permitted in the US and the public comment about the potential for abuse has resulted in the FRC taking steps to reassure the market that audit integrity would not be compromised by the bundling approach. In addition to writing to the major audit firms outlining the steps it intends to take, stakeholders will have an opportunity to raise their concerns with the FRC.

Commenting on the review Boyle said: "The FRC believes it is important that audit firms and their clients should be aware of the steps being taken and may want to be cautious before entering into arrangements which stretch the internal/external audit boundary, not least because it could prove to be inconvenient and/or costly to change such arrangements should the outcome of the FRC’s work be that the Ethical Standards are changed in a way that affects the provision of such services.”

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