How to Prepare for a Financial Audit in Nairobi

A financial audit can feel daunting, especially if it’s your first time. However, proper preparation saves time, reduces stress, and ensures a smooth process. Whether you’re a small business, startup, or established firm in Kenya, here’s a step-by-step guide to getting audit-ready.

Why Preparation Matters

• Avoid last-minute scrambling for documents.

• Reduce audit fees (disorganized records take longer to review).

• Prevent KRA penalties if discrepancies are found.

Step 1: Gather Key Financial Documents

Your auditor will need:
✅ Bank statements (last 1-3 years)
✅ Income statements & balance sheets
✅ Tax returns (filed with KRA)
✅ Invoices, receipts, and expense records
✅ Payroll records (if applicable)
✅ Loan agreements or investor contracts

Tip: Use digital tools like QuickBooks or Xero to keep records organized year-round.

Step 2: Reconcile All Accounts

Ensure your:

• Bank balances match your books.

• Inventory records are up-to-date (for retail/manufacturing).

• Debtors and creditors lists are accurate.

Common Issue: Unreconciled M-Pesa transactions often cause discrepancies.

Step 3: Review Internal Controls

Auditors assess how you handle:

• Cash handling (Who approves payments?)

• Procurement (Are there fake invoices?)

• Payroll (Ghost workers?)

Fix gaps before the audit to avoid red flags.

Step 4: Classify Transactions Correctly

Misclassified expenses (e.g., labeling personal costs as business) raise audit risks.

Example:
❌ “Dinner with family” → “Entertainment expense”
✅ “Client business meeting at XYZ Restaurant” → “Marketing expense”

Step 5: Plan for the Audit Timeline

• Typical duration: 1–4 weeks (depends on business size).

• Provide a dedicated contact person (e.g., your accountant) to speed up the process.

Post-Audit: Implement Recommendations

Your auditor will suggest improvements (e.g., better record-keeping, fraud prevention). Act on them to avoid future issues.

Need Help Preparing?

At Jobson and company, we help Nairobi businesses prepare for audits efficiently and comply with Kenyan regulations. Book a consultation today!