Is the client exempt from audit? Nigeria and Kenya
How Kenyan and Nigerian companies qualify for audit exemption, and why Achekam's check will not conclude until its thresholds are approved.
By Achekam · · 4 min read · For Accountants & audit firms in Nigeria, Kenya
"Do we actually need an audit?" is one of the first questions a growing company asks its accountant, and one of the easiest to answer wrongly. The tests look like simple thresholds. In practice they combine size, type of company and two years of figures, and the law in each country words them differently.
For Kenya the tests are clear in the Companies Act at the time of writing. For Nigeria the thresholds Achekam would apply are still held under review. In both countries, Achekam's check will not give you an answer until its thresholds have been approved by Achekam's platform administrators. This article explains the law as the facts state it and what that means for the firm in the meantime.
Kenya: what makes a company small
Under the Companies Act 2015 s.624(3), as amended in 2019, a Kenyan company is small if it meets 2 of 3 tests, this year and last year:
- turnover up to KES 50 million;
- net assets up to KES 20 million;
- 25 or fewer employees.
Some companies cannot be small whatever their size: public companies, and members of listed, banking, insurance and similar groups are excluded by s.626. The text is on Kenya Law in the Companies Act 2015.
Kenya: the exemption is narrower than "small"
Being small is not enough for audit exemption. A Kenyan company is exempt from audit only if it is small and its turnover is at most KES 50 million and its net assets at most KES 20 million (ss.711(2) and 712). Public companies, banks and insurers never qualify. Dormant companies have a separate exemption under s.714.
The difference is easy to miss. Take a company with few employees and modest turnover but net assets above the limit. It meets two of the three size tests, so it is small. It fails the net-assets condition for the exemption, so it still needs an audit. A company can also be small because of its headcount and turnover while its net assets push it out of the exemption the following year.
That is why Achekam's Kenyan check never decides an exemption on employee numbers alone. The headcount helps decide whether the company is small; it never settles the exemption.
Nigeria: thresholds held under review
For Nigeria, Achekam's audit-requirement check deals with the small-company exemption in CAMA 2020. Achekam has seeded its candidate thresholds under review: turnover of N120 million and net assets of N60 million, with a public-interest turnover limb of N30 billion. Until a platform administrator approves them, the check refuses to conclude on the exemption and flags every such outcome as uncertain.
Read that as a deliberate refusal rather than missing work. The firm should confirm the current thresholds and conditions in CAMA 2020 itself before advising a client that no audit is needed, and record what it relied on.
Thresholds awaiting platform approval
In both countries the position today is the same. Achekam cannot yet tell a firm whether a Nigerian or Kenyan company is exempt from audit, because the small-company thresholds ship awaiting approval by Achekam's platform administrators. Firms cannot approve them. Whether they have been approved on the live service is not something a firm can assume; look at what the check says for a real client.
The Kenyan check uses the Companies Act thresholds only after a platform administrator approves them. Every Nigerian and Kenyan figure in Achekam's rule book was seeded under review, and audit thresholds are among them.
Recording the requirement on the client
On a Nigerian or Kenyan engagement, the engagement page shows an Audit Control Tower, and one of its items is whether company law requires an audit. While the thresholds await approval, that item cannot give a final answer, so the firm's own conclusion has to carry the file.
Write that conclusion down. A good note states the company type, the figures for this year and last year, the tests applied, the section relied on and who reached the conclusion.
The "this year and last year" wording in the Kenyan test means the comparative figures matter as much as the current ones. If last year's figures were never audited or reviewed, say how far they can be relied on for the test. And revisit the conclusion every year: a client that was exempt last year can lose the exemption through one strong year of growth or one large asset purchase.
| Question | Kenya | Nigeria |
|---|---|---|
| Is the company small? | 2 of 3 tests, this year and last | Thresholds held under review in Achekam |
| Who never qualifies? | Public companies, banks, insurers | Confirm in CAMA 2020 |
| Can Achekam conclude today? | Only once thresholds are approved | No: outcome flagged uncertain |
| Who decides for now? | The firm, documented on the file | The firm, documented on the file |
A checklist for an exemption question
- Identify the company type and any group it belongs to.
- Gather turnover, net assets and employees for this year and last year.
- For Kenya, apply the 2 of 3 small test, then the separate exemption conditions.
- For Nigeria, confirm the current CAMA 2020 thresholds and conditions directly.
- See what Achekam's check says, and treat "uncertain" as a prompt to decide yourself.
- Record the conclusion, the figures and the sections relied on.
When the answer is "audit after all"
If the conclusion is that an audit is required, the next questions are about the auditor. In Kenya that means the signer's ICPAK documents, covered in ICPAK certificates and signing a Kenyan audit; in Nigeria, the FRC's confirmation rules in FRC Rule 14 confirmations and Rule 9 key audit matters.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
