Three large audit firms raked in Sh234.2 million in fees from 11 top banks for inspecting their books of account.
Bank filings for the period ended December 2016 show that all the top banks by profitability increased the audit fee, with the exception of Barclays Bank of Kenya (BBK), which has had constant fees for several years now.
On average, auditors’ remuneration rose by at least 5.3 per cent.
The objective of external auditors is to obtain reasonable assurance about whether financial statements are free from material misstatement, either due to fraud or error.
PricewaterhouseCoopers (PwC) audited five of the 11 banks while KPMG had four clients, followed by Ernst & Young with two.
From BBK, Diamond Trust Bank (DTB), Commercial Bank of Africa (CBA), Stanbic Bank, and NIC, PwC made over Sh100 million, an increase by Sh5 million from the 2015 earnings. Its highest fee was from NIC bank (Sh23.4 million) followed by Sh20.5 million and Sh20 million from CBA and BBK respectively. DTB paid Sh17.6 million to have its books audited by PwC.
The firm’s fortunes are set to get even better, with Equity Bank shareholders having endorsed the board’s decision to drop Ernst &Young in its favour. Equity Bank had not changed its auditors since 2004.
KPMG was the second highest beneficiary. From four clients - KCB, Standard Chartered, I&M, and Citibank - it made Sh74.1 million. This was an increase from 2015 when it made Sh69.8 million.
KCB paid Sh42 million, up from the Sh39 million it paid in 2015, making it the lender that incurred the second-highest expense on auditors’ remuneration.
In audit practice, the fee charged is dependent on several factors such as the size of the company and its complexity measured by the number of subsidiaries and branches.
Ernst & Young made Sh43 million from auditing Kenya’s largest bank by customer base, Equity Bank. This was the highest audit fees paid in the banking industry last year as Equity bid farewell to its 12-year relationship with the external auditor. In 2015, it had paid Sh41 million.
From auditing the third most profitable lender in Kenya (Cooperative Bank of Kenya), Ernst & Young made Sh17.2 million. This was higher than the 2015 fees by 9.66 per cent, the fastest rise in fees among the top 11 lenders.