Audit firms outside the popular ‘Big four’ group are being tipped to get more attractive to small and medium-sized enterprises (SMEs) who are increasingly seeking business stability and tax compliance.
The shifting landscape in the business environment is forging new business ties, with ‘Big four’ audit firms seen to be expensive and underservicing SME clients.
The Big 4 audit firms—PricewaterhouseCoopers, Ernst & Young, KPMG and Deloitte—have a strong presence in large and established firms especially those listed on the Nairobi Securities Exchange.
However, with many SMEs seeking to strengthen their book keeping and attract funding by having external auditors check their books, the non-big four audit firms are taking up the space left by audit giants.
Mohsin Adamjee, a partner at Nexia SJ Kenya which offers audit, tax and consultancy services says more SMEs are also demanding these services to comply with Kenya Revenue Authority on tax matters.
“There is increased business coming from SMEs as they focus on having quality book keeping to enhance their stability and also comply with taxation,” said Mr Adamjee.
The audit fees charged by large audit firms is also high when compared to that charged by small but established audit firms, making it easier for SMEs to favor non-big 4 audit firms.
Associate partner at Afrek & Associates, Geoffrey Ng’ang’a reckons that many SMEs are eager to avoid tax penalties and are therefore now paying closer attention to book keeping, tax consultancy and audit services .
“KRA has become very strict and compliance is now being accepted by SMEs as a mandatory thing. Many SMEs chasing government tenders are also now seeking audit services and that is where we come in,” said Mr Ng’ang’a.
He adds that the fees charged by many non-big 4 audit firms tends to be negotiable and able to fit into the budgets of many SMEs.
This is in contrast with the policy of many large audit firms which tend to use formulas to determine audit fees and therefore proves to be expensive.
And with Covid-19 having hurt revenues of many firms, more companies seeking audit services at modest fees are expected to resonate more with the small audit firms.
“Big 4 audit firms tend to be expensive and this means the drop in profits will see more firms seek for audits of reasonable quality at modest prices, mostly from the small but reputable audit firms,” says Mr Adamjee.