1. Tax Health Check & KRA Representation
What is Tax health check?
Tax Health Check entails a rigorous review of the business’s tax affairs to ensure compliance with the relevant tax laws, identification potential risks and opportunities for tax savings. The process analyses the past tax returns, financial statements, and any other relevant documents to verify that all income, deductions and credits have been correctly reported.
Why is tax health check important to a Sacco?
It ensures the accuracy and security of the Saccos tax position as well as securing the reputation of the firm to all stakeholders given that noncompliance in tax matters can attract collusion with tax authorities leading to dragging court proceedings. This severely hurts the SACCOs goodwill in the long run.
When is tax health check conducted?
Preferably they should be conducted on an annual basis especially before the tax season or crucial financial audits. However, regular reviews should be conducted to foster consistent compliance.
What is KRA Representation?
KRA Representation involves where a tax professional, acts on behalf of an individual or business in dealings with the Kenya Revenue Authority (KRA). It is crucial in various tax-related matters, such as compliance, audits, disputes, and general tax management.
When is KRA representation conducted?
Ideally KRA representation is prompted when an organization or individual have concerns with the tax authority or vice versa. It helps in addressing any arising concerns between the two parties.
What’s the role of auditors in conducting tax health & KRA Representation?
Generally, tax health checks fall under compliance audits and as auditors, same as revenue officers carry out a meticulous tax compliance review of all in-house taxes administered by a company.
The Auditor may go on to give certain recommendations depending on whether the level of compliance is wanting or not and especially if the advisory services were requested for.
In cases where the representation arising is brought about by recommendations or tax filing done by the auditor, we are considered partially liable since we acted as agents of the organization in matters tax. This is especially a concern if we are outsourced for tax matters and particularly in tax filing issues.
Benefits
It is a proactive measure that can help individuals and businesses avoid problems with the tax authorities, reduce tax liabilities, and optimize their financial situation. A representative brings specialized knowledge and experience in dealing with KRA, helping to navigate complex tax issues.
2. IFRS 9 & 16
What is IFRS 9
IFRS 9 is an International Financial Reporting Standard issued by the International Accounting Standards Board (IASB) that deals with the classification, measurement, impairment of financial instruments. The financial Instruments include Equity Instruments, Cash & Cash equivalents, Receivables etc.
Why do Saccos need IFRS 9
As an investment avenue, SACCOs pool together the savings of its members and lends them out or invests in authorized financial instruments such as treasury bills and bonds. This invokes the need to familiarize themselves with the classification, recognition and measurement as well as impairment of financial assets.
Importance of IFRS 9
It provides a firm framework for the classification, measurement and impairment of financial assets. Other than that, was introduced to correct the vagueness, inconsistencies brought about by IAS 39 in the treatment of financial instruments.
Our role as auditors in implementation of IFRS 9
To ensure proper classification of the three categories of financial instruments as well assess the reasonableness of management expected credit loss judgement. Other than this, is to ensure that Hedge accounting documentation aligns with the standard’s requirements.
What is IFRS 16
IFRS 16 is an International Financial Reporting Standard issued by the International Accounting Standards Board (IASB) that deals with the accounting for leases. It became effective for annual reporting periods beginning on or after January 1, 2019. It changed how leases are reported in financial statements, particularly for lessees.
Why do Saccos need IFRS 16
During their undertakings SACCOs enter into lease agreements with third parties be it financial or operating leases. They often appear to be the lessors but in other instances can be the lessee. Therefore, It is in their best interest to familiarize themselves with this reporting standard for purpose of accurate reporting in the books of accounts.
Importance of IFRS 16
Firstly, it provides a sound framework for recognizing, measuring, presenting and disclosing leases. It provides lessee accounting model requiring lessees to recognize assets and liabilities for all leases. Secondly, it has since replaced IAS 17 which did not accurately represent lease transactions in financial statements, particularly for operating leases.
Our role as auditors in implementation of IFRS 16
Our role is to ensure that rightful recognition of the Right Of use assets (R.O.U.A), interest and depreciation expenses. Additionally ensure sale & leaseback transactions are recognized and treatment is adhered to as the framework dictates.
Benefits
Provides more transparent and comparable information on financial instruments & leases as well as financial reporting.
3. Anti-Money Laundering (AML) & Counter Terrorism Funding (CTF)
AML is the process by which criminals conceal the origins of money obtained through illegal activities, such as drug trafficking, corruption, or fraud, by passing it through a complex sequence of banking transfers or commercial transactions.
CTF involves providing funds for terrorist activities, either through legal or illegal means. AML and CTF measures are essential for maintaining the safety and stability of the financial system, protecting societies from the harms of crime and terrorism and this is enhanced through registration with Financial Reporting Centre (FRC).
Entities required to be registered with FRC are:
- Financial Institutions e.g.: Banks, Insurance, Micro Finance Institutions, Foreign Exchange Bureau etc.
- Designated Non-Financial Businesses and Professions (DNFBPs) e.g.: Lawyers, Accountants/Auditors, Real Estate Agents etc.
- Other Entities e.g. NGOs
Benefits
Implements robust monitoring and reporting systems to detect suspicious activities and transactions as well as compliance the relevant laws in the country.
4. Data Protection Policy, Review & Registration
What is a Data Protection
Refers to the practices, guidelines, and legal requirements that organizations must follow to ensure the privacy and protection of personal data. This is governed by the Data Protection Act, 2019, which guides how personal data is handled, processed, and stored.
Office of the Data Protection Commissioner (ODPC)is responsible for compliance of the same. The fine for non-compliance is amount not exceeding five million shillings or to imprisonment for a term not exceeding two years, or to both
Why is it Important
It prevents information of an organization from fraudulent activities, hacking and identity theft which are frequent occurrences with the ever-progressive technological advancement. It also meets legal requirements, reduces risk and enables business to respond to threats.
What our role as auditors
Bolster data security measures and ensures that there is adherence to legal requirements and regulatory compliance.
Furthermore, they help streamline processes in that the data security audits uncover a significant number of inefficiencies in data management processes. We also enhance customer trust and mitigate potential risks.
Benefits
Identifies and mitigates risks associated with data handling, storage, and reduces the likelihood of data loss or corruption.
5. ICT Audit
What is ICT audit
This is a comprehensive examination of an organization’s information systems, including its IT infrastructure, applications, data management, and cybersecurity practices. Its goal is to evaluate the effectiveness, efficiency, and security of IT systems and to ensure that they align with the organization’s objectives, policies, and regulatory requirements.
When is it conducted
Usually conducted on an annual basis or periodically based on the size of the enterprise and the nature of the business they are engaged in. They are also conducted upon occurrence of major ICT related incidents such as phishing or unethical hacking.
Why is it important
ICT audits they help to reduce the likelihood of security breaches or data loss as they identity vulnerabilities and recommend measures to enhance data protection as well as evaluate the design and effectiveness of internal controls related to IT processes, providing insights into potential weaknesses.
Lastly, they help determine compliance with relevant laws and regulations such as the Communications Authority of Kenya (CAK) and the Directorate of ICT security, Audit and Control.
What is our role as auditors
Analyzing and assessing a company technological infrastructure to ensure processes and systems run accurately and efficiently while remaining secure and meeting compliance regulations.
Benefits
To identify the risks that surround the ERP system implemented by the society.
6. Human Resource Review
This is a comprehensive evaluation of an organization’s human resources (HR) practices, policies, and processes.
The purpose of an HR review is to assess the effectiveness and efficiency of HR operations, ensure compliance with employment laws and regulations, and identify opportunities for improvement. Some of the Service offered by the HR are:
- Employee engagement
- Job evaluation
- Employee screening
- Performance Management
- Training & Development
- Employee recruitment
Benefits
Gain invaluable insights to strengthen your HR functions and align it with your strategic objectives. Identifies bottlenecks, gaps in training or ineffective management practices that may be hindering productivity alongside maintaining a low employee turnover as well as increase talent recruitment.
7. Unclaimed Financial Assets
What is Unclaimed Financial Assets
Unclaimed Financial Assets refer to financial assets or funds that have been left inactive or unclaimed by their rightful owners for a specified period.
These assets can include bank accounts, insurance policies, pensions, stocks, bonds, and other types of financial holdings. They are governed by the Unclaimed Financial Assets Authority Act, 2011.
A person convicted of an offence under this section shall be liable to a fine of not less than fifty thousand shillings and not more than one million shillings or to imprisonment for not more than one year, or to both.
Why is it important
The benefit can double down as its importance since it exists primarily to improve financial institutions systems and processes for tracking and reuniting unclaimed assets with their rightful owners.
What is the role of the auditors
Verify any compliance issues and areas of potential exposure relating to UFA law.
Benefits
Encourages financial institutions to improve their systems and processes for tracking and reunite unclaimed assets with their rightful owners
8. Governance Audit
Entails a comprehensive evaluation of an organization’s governance structures, processes, and practices. The purpose of a governance audit is to assess the effectiveness, efficiency, and compliance of governance arrangements, ensuring that they support the organization’s objectives
Why is it important
Not only does it streamline any matters relating to governance but also identifies and addresses any inherent risks associated with the same. At the same time, governance audits provide oversight on all management practices creating certain checks and balances.
When is it conducted
They are conducted regularly, especially more often in the public sector where the risk of poor governance is inherently high. However, the frequency of the audit generally lies between 1-2 years.
What is the role of the auditors
Examining areas linked to board effectiveness, overall risk management, compliance with both law and any stipulated regulations as well as Internal controls and organizational culture.
It also helps the organization evaluate and enhance their governance structures, ensuring they meet the highest standards of accountability, transparency and effectiveness.
In general, the aim is to provide a comprehensive governance assessment which thoroughly evaluates the governance framework.
Benefits
Demonstrates a commitment to good governance which will build trust and confidence among members and potential investors. Promotes rightful stewardship in management and use of owners/stakeholders’ resources as well as provide oversight over entire organization which is key in controlling of performance.