The Big Four namely PricewaterhouseCoopers (PwC), Deloitte Kenya, EY and KPMG increased their 2017 fees even on companies that sank deeper into losses, earning more than Sh781.8 million collectively.
Equity Group paid the most expensive fees among listed firms- Sh57 million- being 29.7 per cent higher than the Sh44 million it paid out to PwC after dropping over a decade-old auditor EY.
Audit fees is charged based on the knowledge and skills that an audit firm uses for the process as well as the time taken for the assignment.
Top audit firms that inspect books of the Nairobi Securities Exchange (NSE) listed companies increased their 2017 fees by 10.6 per cent on average, in a year when more than half of the businesses reported reduced earnings.
Data on 51 out of the 63 NSE firms that have made public the amount of money they spent on external auditors show that the Big Four namely PricewaterhouseCoopers (PwC), Deloitte Kenya, EY and KPMG increased their fees even on companies that sank deeper into losses, earning more than Sh781.8 million collectively.
PwC, which handles top NSE-listed companies such as Safaricom #ticker:SCOM, East African Breweries #ticker:EABL, Kenya Power #ticker:KPLC, KenGen #ticker:KEGN and Equity Group #ticker:EQTY took the lead, making over Sh350 million for auditing 15 listed firms.
Equity Group paid the most expensive fees among listed firms- Sh57 million- being 29.7 per cent higher than the Sh44 million it paid out to PwC after dropping over a decade-old auditor EY.
According to the Institute of Certified Public Accountants (ICPAK) chairman Julius Mwatu, audit fees is charged based on the knowledge and skills that an audit firm uses for the process as well as the time taken for the assignment.
“Fees charged depends on the complexity of the assignment, risk and the time spent on a particular assignment,” said Mwatu in a phone interview.
“Banks’ audit is very risky and you don’t expect audit firms to send audit assistants. Most of the time such audits will be handled by audit seniors and above. The audit fee for banks will therefore tend to be higher.”
From 11 listed banks, auditors made Sh269.54 million, an increase of 13. 2 per cent from Sh238 million charged in 2016.
PwC’s overall increased earnings was despite losing Barclays Bank of Kenya (BBK) #ticker:BBK to KPMG and Kakuzi Tea #ticker:KUKZ to Deloitte. Excluding the two clients and TPS Eastern Africa #ticker:TPSE, its audit fee from 12 clients is up 15.95 per cent to Sh334.5 million from Sh288.5 million earned in previous year.
Deloitte audited 14 listed companies’ books earning over Sh152 million. Despite the financial turmoil facing Athi River Mining Cement #ticker:ARM, Deloitte increased the audit fees by Sh280,000 to Sh10.84 million.
Britam #ticker:BRIT, which issued a profit warning as earnings shrunk 4.7 times, earned Deloitte Sh29.4 million. This was 13 per cent higher than Sh26 million charged in the previous financial year. Deacons Holdings, which also issued profit warnings as losses widened three times, had to spent Sh5.4 million on auditing, an increase of 7.5 per cent.
KPMG, with 19 clients listed on NSE, made more than Sh250 million.
It relaxed audit fee for KCB #ticker:KCB to Sh40 million from Sh42 million charged in 2016. However, this was compensated with a new client, BBK, that paid Sh40 million. It also increased fees on clients such as Limuru Tea #ticker:LIMT, Standard Group #ticker:SCAN and Liberty Kenya #ticker:CFCI.
Similarly, Ernst & Young increased fees on its five clients to make Sh71.6 million, up from Sh64.9 million earned in 2016 from the same clients. CIC Insurance #ticker:CIC and Cooperative Bank #ticker:COOP paid Sh26.2 million and Sh18.6 million on average.
The attempt by auditors to fix audit fees was blocked by Competition Authority of Kenya which argued that the move may decrease competition, reduce innovation and efficiencies, and limit customer choice.
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