Ernst & Young (EY)'s fees from auditing Safaricom doubled to Sh125.3 million in the financial year ended March, setting record earnings by an audit firm from a listed company in Kenya.
Safaricom's annual report covering the financial year ended March 2023 shows expenses towards auditor’s remuneration rose by 69.2 percent from Sh62.2 million, coming in the period the telco launched commercial operations in Ethiopia.
EY replaced PwC as Safaricom’s external auditors on July 31, 2020, and its audit fees were Sh55.6 million and Sh55.4 million in 2020 and 2021 respectively.
The latest EY audit fees from Safaricom set a record among the ‘Big 4’ peers that include PwC, Deloitte and KPMG.
The EY fees now overtake that of PwC, which saw its remuneration from KCB Group rise from Sh82 million in 2021 to Sh89 million in 2022. KCB has 12 subsidiaries covering six countries.
PwC also earned Sh81 million from auditing Equity Group last year.
Safaricom has four active subsidiaries —Vodafamily Ethiopia Holding Limited, Instaconnect Limited, Safaricom Money Transfer Services and DigiFarm Kenya Limited— all requiring extensive audits.
Two other subsidiaries, East Africa Tower Company Limited and One Communications Limited (which had three subsidiaries) were written off in 2017.
Safaricom also has two associates — Circle Gas Limited and The East African Marines Systems Limited (Teams) — as well as one joint venture (M- Pesa Africa Limited).
The telco and its partners paid $850 million (Sh120 billion) as telecommunications licence fees and started commercial operations in Ethiopia last year in October. This has extended the audit scope.
Safaricom plans capital expenditure of between Sh40 billion and Sh45 billion on the Ethiopia unit in the current financial year, having received approval to launch mobile money services.
Safaricom’s audit, risk and compliance committee says its relationship with EY worked well during the period under review.
The telco’s board has proposed that EY continue to audit Safaricom in the current financial year which will end in March 2024. Shareholders will vote on this proposal on July 28 during the annual general meeting.
“The external auditor is required to rotate the audit partner responsible for the company’s audit at least every five years,” says Safaricom.
Audit fees are mainly determined by factors such as the complexity of the assignment, risk level, time spent on the assignment and the qualifications of the audit team.
Some of the key roles of external auditors are obtaining sufficient audit evidence regarding the financial information given by the company, supervising the audit and expressing an opinion on the financial statements.
