Kenya

The Companies Act 2015 governs the corporate financial reporting, including accounting and auditing, requirements in Kenya. The Act states that all companies are required to prepare and present financial statements and provides requirements for the preparation, publication, audit, and inspection of financial statements. The Act defines prescribed financial accounting standards as statements of standard accounting practice issued by a professional body or bodies in accounting and finance recognized by law in Kenya.

The Accountants Act of 1978 (as amended in 2008) establishes the Institute of Certified Public Accountants of Kenya (ICPAK) as the recognized accounting and auditing standard-setter. In December 1999, ICPAK adopted IFRS as issued by the IASB without modifications including the effective dates and in 2010 IFRS for small- and medium-sized entities (SMEs) became effective. All entities that are not publicly accountable may choose between using IFRS for SMEs or full IFRS. ICPAK has designated that the following entities are publicly accountable and therefore must apply full IFRS: (i) entities whose debt or equity instruments are traded in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local and regional markets), or are in the process of issuing such instruments for trading in a public market; (ii) entities that hold assets in a fiduciary capacity for a broad group of outsiders as one of its primary businesses; (iii) public organizations that are owned in whole or in part by the State or that are otherwise controlled directly or indirectly by the State; and (iv) private organizations in which the State has a non-controlling equity interest. The Companies Act 2015 introduced a regime for SMEs which exempts them from audits but stipulates that they must prepare financial statements and submit the statements as returns to the register for every reporting period. Under Section 711 of the Act, SMEs are defined as companies that (i) do not have a turnover of more than fifty million shillings in a financial year and (ii) the value of its net assets specified in its balance sheet at the end of the year does not total more than twenty million shillings.

Part XXVII of the Companies Act 2015 requires companies, except for companies that qualify as SMEs as noted above, to have their financial statements audited. Audits must be conducted by members of ICPAK who hold a practicing certificate issued by the institute pursuant to Section 21 of the Accountants Act as amended in 2008. Since 1999, ICPAK has adopted ISA, including any revisions and effective date, as issued by the IAASB without any modifications.

Banks and similar financial institutions, deposit-taking savings and credit cooperatives (SACCOs), non-deposit taking cooperatives, listed companies, and insurance companies are regulated by different entities; however, as public interest entities these companies must use IFRS.

The Central Bank of Kenya (CBK) regulates banks and similar financial institutions in Kenya and Deposit-taking SACCOs are regulated by the SACCO Societies’ Regulatory Authority (SASRA) whereas non-deposit taking SACCOs are regulated by the Ministry of Cooperatives. These regulators maintain respective lists of approved auditors that must audit the companies in accordance with ISA.

The Insurance Regulatory Authority of Kenya (IRA) regulates insurance companies, and it requires that the insurance companies’ financial statements must be verified by auditors with regard to certain material issues.

The Institute of Certified Public Accountants of Kenya (ICPAK) was established in 1978 and is mandated by the Accountants Act of 1978 (as amended in 2008) to regulate the accountancy profession. Membership in the institute is mandatory to practice accountancy as further explained below. ICPAK’s functions include: (i) setting accounting and auditing standards; (ii) advising the Kenya Accountants and Secretaries National Examination Board (KASNEB) and Registration Committee on issues relating to examination and registration policies; (iii) establishing continuing professional development for its members; (iv) advising the Cabinet Secretary in charge of finance matters in government, on matters relating to financial accountability; (v) setting ethical requirements for its members; (vi) establishing an investigative and disciplinary (I&D) system for members; (vii) implementing and conducting quality assurance reviews for all audits; (viii) maintaining a registry of individual and member firms; and (ix) providing thought leadership on matters of finance and accountancy in Kenya.

Candidates for the profession are required to complete a degree in accountancy, economics, finance, or law from a recognized university or have the qualifications equivalent to admission to a degree in a university and complete three modules of the professional accountancy education program, and pass exams administered by the Kenya Accountants and Secretaries National Examinations Board (KASNEB). The KASNEB is a separate body established by the Accountants Act of 2008 to administer exams for persons intending to qualify for registration as accountants.

The bulk of ICPAK’s student membership comprises those pursuing accountancy either at the technician level – Accounting Technician – or at professional level – Certified Public Accountant (CPA(K)).

ATs must complete the Accounting Technician Diploma curriculum and pass examinations, set by the KASNEB. CPA(K) must complete the CPA curriculum and pass examinations, also set by the KASNEB, have three years of practical experience, and register with ICPAK. The designation CPA(K) is reserved for professional members of ICPAK. The Registration & Quality Assurance Committee, an independent statutory committee of ICPAK, is empowered to register those who have attained the abovementioned qualifications.

Practicing Members are ICPAK members who are registered as Full Members (CPA(K)) and have an additional two years of experience in audit work that is supervised by a licensed practicing member of ICPAK. To be a Practicing Member, individuals must submit an application to ICPAK and once it is approved, they are licensed to offer auditing and accountancy services to the public.

There is no independent audit oversight body for the profession. Auditors are regulated by the Institute of Certified Public Accountants of Kenya (ICPAK) in accordance with the Accountants Act of 1978 (as amended in 2008) as described in the Regulation section.

Institute of Certified Public Accountants of Kenya (ICPAK) 

ICPAK was established in 1978 and is mandated by the Accountants Act of 1978 and its 2008 amendments to regulate the accountancy profession. Membership in the institute is mandatory to publicly practice accountancy and to use the designation of Certified Public Accountant (CPA(K)).

ICPAK’s functions include: (i) setting accounting and auditing standards; (ii) advising the Kenya Accountants and Secretaries National Examination Board and Registration Committee on issues relating to examination and registration policies; (iii) establishing continuing professional development for its members; (iv) advising the Cabinet Secretary in charge of finance matters in government, on matters relating to financial accountability; (v) setting ethical requirements for its members; (vi) establishing an investigative and disciplinary system for members; (vii) implementing and conducting quality assurance reviews for all audits; (viii) maintaining a registry of individual and member firms; and (ix) providing thought leadership on matters of finance and accountancy in Kenya.

In addition to being a Full Member of IFAC, ICPAK is also a member of the Pan-African Federation of Accountants.

• As sustainability reporting becomes increasingly demanded, ICPAK is coordinating plans to adopt the IFRS S1 and S 2 issued by the ISSB by end of 2023.

In line with its mandate to regulate the accountancy profession under the Accountants Act of 1978, as amended in 2008, the Institute of Certified Public Accountants of Kenya (ICPAK) is responsible for establishing and implementing a mandatory quality assurance (QA) review system for all audits.

ICPAK began mandatory QA reviews for all audits in January 2006. The Audit Quality Review Program is overseen by the Registration & Quality Assurance Committee of the institute. The institute has adopted a cyclical and risk-based approach in determining firms and partners to review.

ICPAK benchmarked its QA system against SMO 1 requirements and revised its framework and procedures to be in line with best practice. ICPAK’s AQA system has been revised to capture recent changes in relevant standards including ISQM 1&2, ISA 220 revised, and ISA 315 revised requirements.

Current Status: Adopted

The Accountants Act of 1978, as amended in 2008, establishes some initial professional development requirements such as adequate knowledge of local law and practice, experience in accounting, and acceptable professional conduct; however, the Institute of Certified Public Accountants of Kenya (ICPAK) and the Kenya Accountants and Secretaries National Examinations Board (KASNEB) share responsibility in defining and implementing the appropriate education and training of professional accountants.

KASNEB was established by the Accountants Act of 1978 as a statutory body responsible for setting the Accounting Technician and Certified Public Accountant curriculum and administering the examinations for candidates intending to qualify and register as professional accountants. Both ICPAK and the KASNEB state that KASNEB curriculum and examinations are in line with IES requirements. In 2021-2022, ICPACK jointly with KASNEB, undertook a comprehensive review of the structure and content of the professional education program. ICPAK and KASNEB will conduct this review every three years to ensure that it adequately covers all facets of the accountancy profession including emerging issues.

ICPAK has also established continuing professional development requirements which it states are in line with the latest IES.

Current Status: Adopted

The Accountants Act of 1978 and its 2008 amendments establish the Institute of Certified Public Accountants of Kenya (ICPAK) as the auditing standard-setter.

Since 1999, ICPAK has adopted ISA, including any revisions, as published by the IAASB without modifications, including the effective date.

Current Status: Adopted

In accordance with the Accountants Act of 1978 as amended in 2008, the Institute of Certified Public Accountants of Kenya (ICPAK) is mandated to establish ethical requirements for members.

ICPAK first adopted the 2009 IESBA Code of Ethics as the ICPAK Code of Ethics and has continuously updated it to incorporate new and revised requirements issued by the IESBA. Accordingly, ICPAK reports that its members adhere to the latest version of the IESBA Code. In the case of one modification that has been made, ICPAK reports it is more stringent that the requirements in the IESBA Code.

Current Status: Adopted

Under the Public Finance Management Act of 2012, the Public Sector Accounting Standards Board (PSASB) is authorized to set generally accepted standards for the development and management of accounting and financial systems by all state organs and public entities.

The Board adopted IPSAS as issued by IPSASB for use by all public sector entities. Currently, public sector entities are using IPSAS with no modifications on a partial accrual-basis. The government has recently announced the adoption of IPSAS Accrual from the year 2024 across all public sector entities in Kenya. Several strides too have been made including having a Board representation at IPSASB from Kenya and participation in the IPSASB exposure draft issued in 2022 & 2023 such as exposure draft (ED) 84, concessionary leases and right-of-use assets in-kind (amendments to IPSAS 43 and IPSAS 23). The Institute further in 2022 constituted a Public Sector Sub Committee whose mandate was to advise on areas relating to implementation of standards in public sector reporting.

Current Status: Partially Adopted

The Accountants Act of 1978, as amended in 2008, empowers the Institute of Certified Public Accountants of Kenya (ICPAK) to establish an investigative and disciplinary (I&D) system for its members.

The institute carries out the I&D process with preliminary proceedings conducted through its staff and the independent statutory Disciplinary Committee, which was established under the 2008 amendments to the Accountants Act of 1978 to hold disciplinary hearings. Its Registration and Quality Assurance Committee currently carry out the investigation functions.

ICPAK reports that it continues to focus on addressing all requirements of SMO 6; however, to implement initiatives that would align its I&D system with the SMO 6 requirements (e.g., an independent investigation committee), further revisions to the Accountants Act are required. ICPAK indicates that it has submitted such proposals to the Parliament.

In December 2022, the subsidiary Accountants Act Regulations were passed. This converted the Institute’s by-laws into law and allocated more investigatory roles to the Registration and Quality Assurance Committee. Further amendments are expected in 2023-2024 to deal with identified gaps which will be further beefed up with the planned annual surveys.

In 2022, the Institute developed a report on status of all complaints made in the year. The Institute also developed Disciplinary Committee procedures to guide on the disciplinary process at the Committee level. The automation of the process and standardization of the reports are currently ongoing. This has been benchmarked against other PAO’s in Africa through the PAFA initiatives.

The Institute’s annual CPD calendar details several trainings where on practical ethics and the internal processes of dealing with misconduct. This will continue to be done by having a forum at least once every quarter.

Current Status: Partially Adopted

The Accountants Act of 1978, as amended in 2008, establishes the Institute of Certified Public Accountants of Kenya (ICPAK) as the recognized accounting standard-setter. In December 1999, ICPAK adopted IFRS as issued by the IASB without modifications including the effective date and in 2010 IFRS for small- and medium-sized entities (SMEs) became effective.

All entities that are not publicly accountable, as defined by the law and ICPAK, may choose between using IFRS for SMEs or full IFRS. The Companies Act 2015 introduced a regime for SMEs which exempts them from audits but stipulates that they must prepare financial statements and submit the statements as returns to the register for every reporting period.

Banks and similar financial institutions, deposit-taking Savings and Credit Cooperatives, non-deposit taking cooperatives, listed companies, and insurance companies are all regulated by different entities; however, as public interest entities all these companies must use the IFRS.

Current Status: Adopted

Relevant Organizations

• Institute of Certified Public Accountants of Kenya (ICPAK)
• Kenya Accountants and Secretaries National Examinations Board (KASNEB)

Relevant Legislation

• Accountants Act 1978, as amended in 2008
• Companies Act, 2015

Relevant Publications

• ICPAK, SMO Action Plan, 2023.
• IFRS Foundation, IFRS Application Around the World—Jurisdictional Profile: Kenya, June 2016.
• World Bank, Report on the Observance of Standards and Codes—Accounting and Auditing: Kenya, April 2010.