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    Country by Country Financial Reporting and Auditing Framework

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    Kenya – Crowe Horwath EA (prepared January 2017)

    Preparation of and Filing of Statutory Financial Statements

    Private Limited Companies and Partnership registered in Kenya are required to prepare annual financial statements and file these at the Company Registrar within 9 months of the accounting reference date.

    Public limited companies are required to file their financial statements at the Company Registry within 6 months of the accounting reference date.

    Public listed companies are required to file their financial statements at the Capital Markets Authority within 4 months of the accounting reference date. These must also be filed at the Company Registry.

    All companies and Partnership are required to prepare full financial statements.  

    Large and medium sized groups are required to prepare consolidated financial statements subject to exceptions as per IFRS. 

    Financial Reporting Framework

    Listed companies in Kenya are required to prepare their financial statements in accordance with International Financial Reporting Standards (IFRS).  IFRS is that promulgated by IASB.

    Public Interest Entities (PIEs) must prepare their financial statements in accordance with full IFRS. These include banks, insurance companies and pension funds.

    All other companies / partnerships in Kenya are subject to any other requirements which may be otherwise specified, have the option to prepare their financial statements in accordance with IFRS for SMEs or full IFRS.

    Subsidiary companies of listed companies have to prepare their financial statements in accordance with full IFRS.

    None public interest companies can take advantage of reduced disclosure by preparing their financial statements in accordance with International Financial Reporting Standard for Smaller Entities (IFRS for SME).

    Partnerships have the option of preparing their financial statements under full IFRS or IFRS for SMEs. In practice, they opt for IFRS for SMEs.

    Audit Requirements for Companies and Partnerships Registered In Kenya

    In Kenya, all companies / partnerships must be audited unless they qualify for audit exemption as stipulated in the new companies Act (2015). This is explained in detail below.

    Audit Exemption

    A company is not entitled to exemption unless its balance sheet contains a statement to the effect that:

    1. The members have not required the company to obtain an audit of its financial statements for the relevant financial year
    2. The directors acknowledge their responsibilities for complying with the requirements of the new Companies Act (2015)

    Audit exemptions may be granted if certain conditions are met or exist during period under review.

    Table below shows companies exemption status and conditions to be met for each category.

    Type

    Audit exemption status

    Conditions to be met

    Small companies(private)

    Exempted

    1. that the company qualifies as a small company in relation to that year
    2. that it's turnover in that year is not more than Kshs.50 million ($ 500,000)
    3. that the value of its net assets specified in its balance sheet as at the end of that year is not more than Kshs. 20 million ($ 200,000)
     

    Dormant companies

    Exempted

    1. Dormant since formation
    2. Dormant since the end of the previous financial year.
     

    Group companies

    Not Exempted unless certain conditions are met

    1. that the group qualifies as a small group in relation to that year
    2. that the group's aggregate turnover in that year is not more than Kshs. 725 million ($ 7.25 million) or Kshs 865.5 million gross ($ 8.655 million)
    3. that the aggregate value of the net assets of the companies comprising the group as specified in the group's balance sheet as at the end of that year is not more than Kshs. 365 million ($3.65M).
     

    Public Companies

    Banks

    Insurance companies

    Not Exempted

    All public companies, Banks and Insurance companies are not exempted from auditing regardless of their size.


    Audit Appointment, Rotation and Joint Audits

    Audit appointments in Kenya are normally for one year. An auditor is appointed/removed at the Annual General Meeting. Kenya does not have any rules relating to mandatory rotation of audit firms but there are guidelines within the ethical standards regarding partner rotation.  Whilst not prohibited, joint audits are very rare in Kenya. There is debate on rotation of audit firms for listed companies but this will evolve. Central Bank of Kenya indicated introducing a mandatory rotation period of 3 years in 2015 for bank audits but is yet to be backed by legislature. Most of our legislature is derived from the UK and several accountants in Kenya are Chartered Accountants of England.

    Auditing Standards

    Horwath Erastus & Co., the Kenya member firm of Crowe Horwath International is required to undertake their audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing. International Standards on Auditing are consistent with the Clarity ISA issued by the IAASB subject to some minor additional requirements relevant within the Kenya.

    Ethical Framework

    Horwath Erastus & Co., Partnership is bound by the Code of Ethics of the Institute of Certified Public Accountants of Kenya (ICPAK). This is based on the IFAC Code (IESBA) with additional commentary for Kenya.

    Additionally, in respect of audit work, we are subject to the Ethical Standards issued by ICPAK. These apply to all registered auditors in Kenya. The Ethical Standards are generally consistent with, the IFAC/IESBA Code.

    Audit Regulation

    Horwath Erastus & Co., partnership, is subject to the following external and internal monitoring processes with regard to their audit practice.

    External Monitoring

    The firm is subject to external review by the Practice Monitoring Unit of ICPAK. All firms must be reviewed once every three years by the Practice Monitoring Unit. We are also subject to external reviews by CH International which is to be carried out once every three years.

    Internal Monitoring

    Annual internal monitoring is done by an external consultant. We also have cold reviews after the busy season where public interest audit files and files from a representative client portfolio are reviewed by persons who were not involved in the engagements. A learning experience is then shared to the entire audit team.

    The QAR system is continuously evolving.

     

    Contacts:

    Cephas Osoro-Partner, Cephas.Osoro@CroweHorwath.co.ke

    David Tua- Director of Audit, David.Tua@CroweHorwath.co.ke

     


    Contact Us
    David Chitty - Audit
    London, United Kingdom
    +44 20.7842.7292


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