The stranglehold that the big audit firms such as Ernst & Young (E&Y) have on the market should be reduced to protect individuals and businesses from unforeseen losses.
Deloitte, EY, KPMG and PwC dominate audit jobs among listed firms and other large organisations.
But in recent years, cases of companies collapsing even after being given a clean bill of health by the auditors have been on the rise.
On Monday, the Capital Markets Authority (CMA) was allowed to investigate E&Y over claims that it helped cook Uchumi Supermarkets’ books, covering up transactions that left the retailer on its deathbed.
The decision by the Court of Appeal to allow the CMA to probe the audit firm is a step in the right direction.
Lenders and suppliers relied on the audit reports to engage with the company, which has since defaulted on its obligations.
A forensic audit report by KPMG showed that Uchumi’s accounts for financial years 2010 to 2014 — prepared by E&Y as the retailer’s auditors at the time — contained misleading information.
The role of audits is to unearth information and transactions that might harm the company and various stakeholders.
When audits fail to reveal such information to the public, they put investments at stake.
A string of corporate scandals has faced the audit market not only in Kenya but globally. From Steinhoff in South Africa to Petrobas in Brazil and Carillion in the United Kingdom, the Big Four have raised concerns in their dealings that need to be addressed urgently.
Experts have taken issue with the Big Four firms running auditing business together with consulting that they say raises serious conflict of interest.It is time the CMA looked at some of the concerns raised globally and reform the sector to protect companies, shareholders and suppliers.It would also help if the authority looked into some of the past questionable audits by some of the firms.