Kenya

Member Organizations

Member Organization Associate Other PAOs

  Institute of Certified Public Accountants of Kenya

Legal and Regulatory Environment

  • Overview of Statuatory Framework for Accounting and Auditing

    The Companies Act 2015, which repealed the revised 2009 version of the Companies Act Cap 486 of 1948, governs the corporate financial reporting, including accounting and auditing, requirements in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, with the exception of companies that qualify as SMEs under the Act, 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.

  • Regulation of Accountancy Profession

    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 in order 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. Those who have completed the CPA qualification program are admitted as Associate members of ICPAK if they do not have the requisite practical experience. Once they complete their practical experience they transition into full membership. After attaining ICPAK membership, individuals are considered Full Members and are allowed to use the CPA(K) designation. 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. An individual who has completed the CPA professional course but has not been registered with the Institute is simply referred to as a CPA Finalist.

    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.

  • Audit Oversight Arrangements

    The audit profession is self-regulated and 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). Only Practicing Members may conduct audits. Practicing Members are ICPAK members who are registered as a Certified Public Accountant and have experience of an additional two years in independent 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.

    ICPAK’s functions related to audit oversight include: (i) setting 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) setting ethical requirements for its members; (v) establishing an investigative and disciplinary system for members; (vi) implementing and conducting quality assurance reviews for all audits; and (vii) maintaining a registry of individual and member firms.

  • Professional Accountancy Organizations

    The Institute of Certified Public Accountants of Kenya (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 in order 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.

    ICPAK has five membership categories based on course of study and practical experience requirements: Non-Practicing Member, Associate Member, Full Member (CPA(K)), Practicing Member (auditors), and Overseas Members (non-Kenya residents).

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

  • Projects or Other Information

    In 2010, the World Bank’s Report on Observance of Standards and Codes (ROSC) noted that there was a lack of legal framework for the adoption of IFRS, low uptake of IFRS for SMEs, and the need for enhanced audit and assurance oversight of the audits of public interest entities. Subsequently, the Institute of Certified Public Accountants of Kenya has been working to address the recommendations made by the ROSC in regards to these areas.

Adoption of International Standards

  • Quality Assurance

    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 officially 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. By January 2018, ICPAK reports it intends to move to a six-year cycle for non-public interest entities (PIEs) while continuing to review PIEs a minimum of once every three years.

    In 2013, with support from the Institute of Chartered Accountants of England and Wales, ICPAK benchmarked its QA system against SMO 1 requirements and has revised its framework and procedures to be in line with international standards of best practice. As of 2016, ICPAK reaffirms that its QA system is maintained in line with the SMO 1 requirements.

    Current Status: Adopted

  • International Education Standards

    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. ICPAK reports that the last review of the KASNEB syllabus was undertaken in mid-2015 which took into consideration the IES in effect at that time. The next planned review is for 2017–2018.

    The Registration & Quality Assurance Committee, an independent arm of ICPAK, is empowered to subsequently register those who have attained the requisite qualifications.

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

    Current Status: Adopted

  • International Standards on Auditing

    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

  • Code of Ethics for Professional Accountants

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

    Current Status: Adopted

  • International Public Sector Accounting Standards

    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.

    In February 2014, the Board became operational and adopted IPSAS as issued by IPSASB for use by all public sector entities. All public sector entities prepared their financial statements for the year ending 30 June 2014 as a pilot phase in line with the Board’s directive, which was as follows: Ministries, Departments & Agencies and County Governments prepared statements on modified cash-basis IPSAS; non- commercial state corporations and semi-autonomous government agencies on accrual-basis IPSAS; and commercial public sector entities use IFRS. The Board has subsequently reviewed the extent of compliance and is providing trainings to further implementation in conjunction with ICPAK.

    Current Status: Partially Adopted

  • Investigation and Discipline

    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 revised SMO 6 requirements, further revisions to the Accountants Act are required. ICPAK indicates that it has already submitted such proposals to the Parliament.

    Current Status: Partially Adopted

  • International Financial Reporting Standards

    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 date and in 2010 IFRS for small- and medium-sized entities (SMEs) became effective.

    All entities that are not publicly accountable, as defined by 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 of these companies must use the IFRS.

    Current Status: Adopted

Disclaimer

IFAC bears no responsibility for the information provided in the SMO Action Plans prepared by IFAC member organizations. Please see our full Disclaimer for additional information.

Methodology

Methodology
Last updated: 10/2016
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