NSE blue chip firms’ audit fees to ‘big four’ rises 11.7pc

Audit fees for listed companies making up the Nairobi Securities Exchange 20 Share Index rose 11.7 per cent last year to Sh375.8 million, an analysis of the firms’ annual statements has shown.

The increased audit bill reflects business expansion for the NSE blue chips, and increased turnover for the accounting firms.

The amount paid to the “big four” external auditors –PricewaterhouseCoopers, Ernst & Young, Deloitte and KPMG— stood at Sh336.2 million the previous year.

The fees represent the total paid in the respective financial years for companies comprising the NSE-20 index, which include KCB, BAT Kenya, KenGen, Nation Media Group and Safaricom among others. The rise in audit fees is attributed to a combination of factors.

“The fees are negotiated by individual companies but their increase is usually due to inflation and expansion of business activities,” said Sammy Onyango, the CEO of Deloitte East Africa.

He added that auditors can also raise their charges in the wake of acquisitions and mergers that increase business complexity. Installation of new systems in a company can also trigger a rise in the fees as auditors will be called in to ascertain if they have strong built-in controls.

Companies with some of the most complex operations and those executing multiple transactions including acquisitions recorded the biggest jump in audit fees.

Insurance group Britam, which was audited by PwC, led with doubling of the charges to Sh33.3 million in the year ended December compared to Sh16.6 million the previous year.

The company’s operations expanded with the acquisition of Real Insurance, which expanded its presence to more African markets.

Agricultural firm Sasini, which is audited by KPMG, followed with a 53.3 per cent increase in the charges to Sh7.7 million in the year ended September 2014 compared to Sh5 million the year before.

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Among the notable activities in the company during the period was the decision to sell 513.7 acres of its leasehold land for about Sh1 billion.

Investment firm Centum recorded a 51.4 per cent jump in the fees to Sh7.8 million in the year ended March compared to Sh5.1 million a year earlier.

The company, which is audited by PwC, has been involved in multiple transactions including disposals and buyouts annually in line with its investment model.

Safaricom, which traditionally pays the largest audit fees in absolute terms, saw its bill rise 12.5 per cent to Sh39.1 million. The telco runs a complex business spanning voice, data, hardware sales, and financial services.

The absence of one-off transactions and a reduction in complexities can also lead to a drop in audit fees, with East African Breweries (EABL) and Scangroup among the four firms which paid less to external auditors in the past financial year.

Analysts say the recent increase in audit fees has been slower compared to the mid-2000s when a sharp jump in demand for auditors significantly raised their compensation and ultimately the amounts charged to clients.

“Even now we are seeing movements but it has not resulted in a scramble for talent,” said Mr Onyango.