NEW YORK (Bloomberg) Alterra Capital Holdings Ltd investors should reject the insurer’s plan to reappoint KPMG-Bermuda after a government accounting board faulted the auditor’s work, said Institutional Shareholder Services Inc.The proxy-advisory service joins Glass Lewis & Co in advising shareholders next month to vote against a proposal by Alterra’s management to keep the Bermuda affiliate of the Big Four accounting firm as the company’s auditor.A review by the Public Company Accounting Oversight Board found deficiencies in the way KPMG-Bermuda tested the fair value of available-for-sale securities on an unnamed public company’s fiscal 2008 financial statements. Alterra, the Bermuda-based insurer formed by the merger of Max Capital Group Ltd and Harbor Point Ltd, said it was the client in a filing on March 31, a day after a Bloomberg News column made the connection.“Shareholders and the company could benefit from the appointment of a new auditor,” ISS said in an April 15 report. It cited the “recently completed regulatory investigation which identified significant deficiencies in the auditor’s methodology for testing and affirming the company’s FY 2008 financial statements, as well as other auditor-related issues which may be of concern”.Susan Spivak Bernstein, an Alterra spokeswoman, and Neil Patterson, managing partner at KPMG-Bermuda, didn’t respond to e-mails seeking comment.