Key audit matters on Kenyan audits
Which Kenyan audits must include key audit matters, how Achekam's Audit Control Tower decides it for an engagement, and when to include them voluntarily.
By Achekam · · 4 min read · For Accountants & audit firms in Kenya
Key audit matters are a familiar part of auditor's reports on listed companies and a less familiar one for most Kenyan practices, whose audit clients are mainly private companies, NGOs, SACCOs and family groups. The questions that matter are simple: which of our audits must include them, which may, and who decides?
This article covers the Kenyan requirement, what the research behind Achekam's Kenya pack did not find, how the Audit Control Tower makes its determination, voluntary key audit matters and the wording under the Companies Act 2015.
Listed entities only
Kenya applies the IAASB's International Standards on Auditing as issued, with ISQM 1 and ISQM 2, and key audit matters are required for listed entities. ISA 701 sets out how they are communicated. The auditor selects, from the matters communicated with those charged with governance, those that required significant auditor attention, then decides which of them were of most significance in the audit of the current period. Each is described in its own part of the report, with why it was a key audit matter and how the audit addressed it.
ICPAK publishes guidance on new and revised auditor reporting, including illustrative auditor's report templates, firm licensing circulars and a firm management guide, on its assurance engagements resource page. It is the first place to look for the Kenyan context of ISA 701.
No extension to other public interest entities found
Some countries extend the key audit matter requirement beyond listed entities. Nigeria's FRC Rule 9, for example, reaches public companies, most banks and insurers, and several kinds of fund. For Kenya, the research behind Achekam's pack found no extension of key audit matters to other public interest entities.
Two cautions follow. "Not found" is not the same as "does not exist": sector regulators can set requirements for the entities they supervise, so the auditor of a bank, an insurer or a pension scheme should check that regulator's current rules. And the law and ICPAK guidance change, so check the position at the time of each audit rather than relying on an earlier engagement file.
The control tower's determination
On a Kenyan engagement, the engagement page shows an Audit Control Tower covering entity classification, whether company law requires an audit, the ISA for LCE, an acceptance checklist, regulatory confirmations and sector checklists. Achekam also works out whether key audit matters are required; for Kenya, the test is whether the entity is listed.
The determination is only as good as the classification underneath it. Before relying on it:
- confirm whether the client's securities are listed, and keep the evidence;
- check that the classification was updated if the client listed, delisted or restructured during the year;
- for a client in a regulated sector, read the sector regulator's rules alongside the determination.
Record the determination and its basis in the audit file, whatever the answer. For a listed client, that record is the starting point for the key audit matter work at planning, not something to discover at the reporting stage. For an unlisted client, a short note that key audit matters are not required, and why, answers the question an ICPAK quality reviewer may ask later.
The acceptance checklist on the control tower must be approved by a partner other than its preparer before the audit report can be approved. The ISA for LCE is not offered on Kenyan audits in Achekam, because no ICPAK adoption was found. The control tower's other checks are covered in the Nigerian and Kenyan audit control tower.
Key audit matters given voluntarily
ISA 701 also applies when an auditor decides to communicate key audit matters without being required to, which some auditors choose to do for large private companies, state-related bodies or entities with many outside users of their statements.
Before including them voluntarily, consider:
- who reads the report, and whether the matters would help them;
- whether those charged with governance have been told in advance;
- that once included, readers will expect them in later years as well.
The decision is the engagement partner's. In Achekam, the engagement team drafts the auditor's report on standard ISA 700, 705, 706 and 701 wording, and only the engagement partner approves it. Choosing the matters themselves is covered in selecting key audit matters.
Wording under the Companies Act 2015
For a Kenyan engagement, the audit report draft uses Kenya's legal wording, citing the Companies Act 2015, and the partner owns the final text. Approval is refused while any bracketed placeholder remains, so a key audit matter section started from a template cannot go out half-finished.
Signing has its own Kenyan gate: Achekam blocks signing until the signing partner's ICPAK practising certificate and annual licence are verified as valid on the signing date, while a missing firm-licence check produces only a warning.
Write each key audit matter for this entity and this year. A workable structure for each one:
- The matter, in plain terms, with a reference to the related disclosure in the statements.
- Why it was a key audit matter: the judgement, estimate or event that made it significant this year.
- How the audit addressed it: the main procedures, described specifically enough to mean something.
- Observations, where the partner judges them useful.
Generic paragraphs lifted from illustrative reports defeat the purpose of the section, and readers who see many reports spot them quickly. Share the draft wording with those charged with governance before the report is finalised, so nothing in it comes as a surprise to the board.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
