CMA mulls reduced audits for firms with strong scores

Companies

CMA mulls reduced audits for firms with strong scores

Monday, March 16, 2020 0:01

By PATRICK ALUSHULA

Firms with a record of strong standing will be spared the annual governance audits in fresh Capital Markets Authority (CMA) guidelines that propose spacing of such checks by up to five years.

The changes will spare strong firms from the costly and time-consuming annual audits, which are currently annual.

CMA acting chief executive Wycliffe Shamiah says the Authority wants to review the frequency, cycle, cost and scope of the audits, which will result in cost savings.

Companies with strong scores in previous governance audits will be audited after every three to five years while those with medium scores will be audited after every two years. Annual reviews will be left to firms with a history of weak scores.

“The Authority will be amending the code (of corporate governance practices) in order to reschedule the governance audits to at least once in every two years with the option of the Authority increasing or decreasing the cycle based on risk-based approach,” said Mr Shamiah in a circular to all listed firms CEOs. The code currently requires all boards to ensure the audits are done at least once in a year to confirm that they are operating on sound governance practices.

Listed firms are required to hire professionals accredited by the Institute of Certified Secretaries (ICS) to do the audit.

Firms with strong governance scores are usually rated as “leader.” Other ranks include good, fair, sub-par and unrated,

Bernard Kiragu, the managing partner of Scribes Services, a corporate services provider, said annual audits were costly.

He added that tying the frequency of audits to scores will motivate weaker firms to strengthen their governance.

Scribes will host two-day training from Thursday for directors and top managers on new corporate governance rules in line with regulatory requirements that demand a 12-hour annual teaching on the subject.

The audits on financial, governance and legal requirements will be part of the training, and test whether firms have complied by CMA demands like disclosure of directors’ pay, their term limits, adoption of a code of ethics and review of board composition.