Mastering the Conduct of an Audit

A Step-by-Step Guide for Kenya’s SMEs and NGOs

Hello, fellow business leaders and financial stewards in Nairobi and beyond! At Pedo & Associates, we’ve walked alongside countless SMEs and NGOs across Kenya, helping them navigate the world of financial audits to foster transparency, efficiency, and sustainable growth. Whether you’re prepping for your first audit or refining your processes, understanding the conduct of an audit isn’t just about compliance—it’s about empowering your organisation to thrive.

In this interactive blog post, we’ll break down the audit process into actionable, iterative steps. We’ll build on each phase, showing how they connect, and include practical tips tailored to Kenya’s dynamic sectors. Think of this as your personal roadmap: we’ll incorporate visual aids to clarify concepts, pose questions to spark your thoughts, and offer checklists for real-world application. Ready to dive in? Let’s start by exploring what the conduct of an audit truly means for your team.

What Does the Conduct of an Audit Really Mean?

The conduct of an audit refers to the structured, independent examination of your organisation’s financial records, internal systems, and operations. It’s designed to deliver reasonable assurance that your financial statements are accurate, fair, and fully compliant with Kenyan laws and international standards like the International Standards on Auditing (ISA), as adopted by the Institute of Certified Public Accountants of Kenya (ICPAK).

For SMEs and NGOs in Kenya, this process builds stakeholder trust—think donors for NGOs or investors for growing businesses—while identifying opportunities for cost savings and risk mitigation. It’s not a one-size-fits-all; it’s iterative, adapting to your unique context, like the diverse challenges in sectors from healthcare (e.g., dispensaries) to community development.

Quick Action Item: Assess your current financial audit readiness. On a scale of 1-10, how confident are you in your internal controls? Jot it down—we’ll revisit this as we go.

Step 1: Planning—Laying the Foundation for Success

Every strong audit begins with thorough planning. This step involves defining objectives, scope, and timelines while gaining a deep understanding of your client’s business environment, inherent risks, and existing controls. For Kenyan firms like yours, this means reviewing ICPAK guidelines on materiality and allocating resources efficiently for fieldwork.

Why iterative? Planning isn’t static; it evolves based on initial insights, setting the tone for the entire audit conduct. In practice, at Pedo & Associates, we start by analysing progress reports and client docs to customise our approach, ensuring cultural sensitivity in Kenya’s vibrant SME and NGO landscape.

Interactive Tip: What risks are unique to your organisation? Share in the comments below—perhaps high inflation impacts or supply chain issues in Nairobi.

Actionable Checklist:

• Review financial statements and prior audits.
• Set materiality thresholds per ISA 320.
• Assemble your audit team and timeline.

Visualise the planning flow:

Step 2: Risk Assessment—Spotting and Mitigating Potential Pitfalls

Building directly on planning, risk assessment dives deeper to identify errors, fraud risks, or non-compliance areas. You’ll evaluate internal controls through interviews, analytics, and walkthroughs. For example, in audits for clients like Kariobangi Dispensary, we use tools to uncover gaps in financial reporting or grant management—common in Kenya’s NGO sector.

This step is iterative because new risks may emerge as you gather data, prompting adjustments to your plan. It’s where the audit conduct shifts from theory to targeted strategy, minimising surprises later.

Interactive Question: Have you ever uncovered a hidden risk during an audit? How did it change your approach? Let’s discuss!

Actionable Checklist:

• Conduct client interviews and control walkthroughs.
• Apply analytical procedures (e.g., ratio analysis).
• Document risks per ISA 315 for ICPAK compliance.

Here’s a diagram to illustrate the risk assessment process:

Step 3: Fieldwork (Testing)—Gathering the Evidence Hands-On

Now, with risks in mind, fieldwork is where the action happens. Your team collects evidence through substantive testing, such as vouching transactions, physical observations, and inquiries. In Kenya’s context, this includes compliance checks with local tax laws and sensitivity to diverse cultural practices in SMEs and NGOs.

Iteratively, findings here feed back into risk reassessment if needed, ensuring a robust audit is conducted. At Pedo & Associates, we emphasise efficiency to deliver cost savings without compromising quality.

Interactive Tip: Try a mini-test: Review one transaction from your books today. What evidence would you need to verify it?

Actionable Checklist:

• Perform sampling and vouching as per ISA 530.
• Test internal controls for effectiveness.
• Document all procedures for traceability.

See this visual on fieldwork procedures:

Step 4: Evaluation & Reporting—Forming Opinions and Insights

Pulling everything together, evaluate your findings to form an audit opinion—unqualified if all’s well, or qualified if issues arise. Draft a compassionate report highlighting strengths and recommendations, aligned with ISA reporting standards. For Kenyan SMEs and NGOs, this means clear language on compliance and growth opportunities.

This step iterates on prior phases, refining insights for accuracy. It’s your chance to add value beyond compliance, like suggesting tax advisory tweaks.

Interactive Question: What makes a great audit report for you? Actionable recommendations or detailed findings? Comment your thoughts!

Actionable Checklist:

• Analyse evidence against objectives.
• Draft report with opinions per ISA 700.
• Include management letters for improvements.

Check out this flowchart for evaluation and reporting:

Step 5: Follow-Up—Ensuring Lasting Impact

The audit doesn’t end with the report; follow-up reviews implementation of recommendations, fostering ongoing partnerships. Schedule virtual or in-person meetings, as we do at Pedo & Associates, to track progress and adapt to new challenges in Kenya’s evolving regulatory scene.

Iteratively, this closes the loop, turning the audit conduct into a cycle of continuous improvement for SMEs and NGOs.

Interactive Call to Action: Schedule your next follow-up today. What’s one recommendation from a past audit you’ll implement this week? Share and inspire others!

Actionable Checklist:

• Set timelines for recommendation tracking.
• Conduct post-audit reviews per ICPAK best practices.
• Build long-term client relationships for future audits.

Wrapping Up: Your Next Steps in Audit Excellence

By following these iterative steps in the conduct of an audit, you’re not just ticking boxes—you’re driving real value for your Kenyan SME or NGO. From planning to follow-up, each phase builds on the last, aligned with ISA and ICPAK for top-tier financial audit services. At Pedo & Associates, we’re here to personalise this for you, whether it’s tax advisory or capacity building.

What’s your biggest takeaway? Drop a comment below, or reach out for a tailored consultation. Let’s make your next audit a catalyst for growth—together.