Charles Kennedy has backed the Lib Dems' deputy first minister in the Welsh assembly following confirmation that an audit on a unit of the Welsh exams board that he managed is to be sent to the police.

The Welsh Joint Education Committee had commissioned auditors to examine the activities of its European Unit, formerly headed by Mike German, including the areas of governance and financial management, credit card expenditure, travel and subsistence claims. The investigation covered the period in which German was in charge.

Kennedy said he was "100 per cent trusting of Mr German" but said that it would not be appropriate to discuss the allegations made against him.

The report has led to calls for German to step down from his roles as deputy first minister and minister for economic development.

Plaid Cymru's Jocelyn Davies said the party was not in a position to comment on the truth of the allegations, but said they "cast a sufficiently dark shadow as to make it impossible for him to continue as a member of the government of Wales".

The Welsh Conservatives also said German should step down to address the issues raised by the report.

Nick Bourne, leader of the Welsh Conservatives in the assembly, said: "The auditors' report raises some very serious questions that need answering from Mike German. The Welsh Conservative Party will be calling for him to stand down from his ministerial posts in order to address this damaging report outside of the Lib-Lab coalition government."

"It is time for Rhodri Morgan to get a grip and stamp some authority on this issue - time for leadership for a change," added Bourne.

Labour's first minister Rhodri Morgan is due to make a statement on the issue this afternoon.

The row has diverted attention from both Labour's and the Liberal Democrats' planned campaigning on issues such as education, public services and tax.

Charles Kennedy is visiting Wales today to launch the Lib Dem student manifesto. He has also been setting out how his party are making a difference in the Scottish parliament and the Welsh assembly.

Labour's Wales Office minister David Hanson added to the tensions between the two parties by challenging Kennedy to say who would benefit from Lib Dem plans for university tuition fees.

"Mr Kennedy says he wants to bring honesty to politics. He could start by telling the truth about his plans for student fees," said Hanson.