By Jim McFie, a Fellow of ICPAK
Since 1 January 1999, Every Set of Financial Statements in Kenya Must Be Prepared in Accordance with International Financial Reporting Standards (IFRSs)
The International Federation of Accountants (IFAC) has published extensive material recently, and each member of the Institute of Certified Public Accountants of Kenya (ICPAK) should be aware of what IFAC is currently engaged in.
Some of you will remember the IFAC Connect Global Events Series entitled “Shaping the future of Accountancy Governance and corporate Success” on August 19-20 at the Radisson Blu in Nairobi last year. The event dealt with “The Interconnectedness of the Global Sustainability Disclosures”, “What are the African Company and Investors’ Expectations with Sustainability Reporting”, “Building a Global, Harmonised System for Sustainability Reporting – Experiences and Perspectives from Africa”, “Global and Regional Regulatory Developments Impacting the Accountancy Profession: Implication of Africa integration” and “Attracting and Retaining Talent in Africa”. I mention these topics because they are close to ICPAK’s heart.
On 12 May 2026, IFAC reminded its members of a document published on 31 March 2026 containing material that became effective the following day, 1 April 2026. An updated set of Statements of Membership Obligations (SMOs) was promulgated. SMOs set global benchmarks for IFAC member Institutes of Accountancy to support the adoption and implementation of international standards, as well as robust quality assurance, investigation and disciplinary systems. IFAC member organisations, of which ICPAK is one, are required to fulfil the SMOs’ requirements. The revisions introduce refinements that reflect developments in quality management, professional education pathways, and expanded corporate and public sector reporting.
IFAC aims to support the continued modernisation of the IFAC Member Compliance Program. The revisions follow a rigorous global due process, including an Exposure Draft and extensive public consultation in 2025, reinforcing the SMOs’ global credibility and authority. A booklet of the new SMOs was published in February 2026. SMO one deals with the quality assurance review system that ICPAK has in place: it monitors compliance with policies and procedures related to a quality management system in audit firms. For the purposes of ISQM 1, a quality management system addresses eight components: the firm’s risk assessment process; governance and leadership; relevant ethical requirements; acceptance and continuation of client relationships and specific engagements; engagement performance; resources; information and communication; and the monitoring and remediation process. SMO states that the International Education Standards (IESs) are authoritative for IFAC member organisations and serve as a global baseline for professional accountancy education by prescribing requirements for: (a) Entry to professional accounting education programs; (b) Initial Professional Development of aspiring professional accountants; and (c) Continuing Professional Development (“CPD”) of professional accountants. The IESs are principle-based standards that provide IFAC member organisations flexibility in determining the entry points and pathways to develop the required level of technical competence, professional skills, and professional values, ethics, and attitudes. The implementation of the IESs includes significant consideration of the local context, flexible entry points and professional development pathways, and a focus on developing a consistent baseline for professional accountants.
Every audit carried out in Kenya in the private sector must be based on the International Standards in Auditing and the International Code of Ethics for Professional Accountants (including International Independence Standards), which means that ICPAK is 100% in compliance with SMO 3 and SMO 4. SMO 5 deals with International Public Sector Accounting Standards (IPSASs) set by IPSASB and IPSASB Sustainability Reporting Standards: once again ICPAK is 100% compliant with this SMO due to the close relationship that ICPAK has with the Kenya Public Sector Accounting Standards Board, a Government Agency under the Ministry of National Treasury and Economic Planning.
ICPAK has functioning Committees for Registration, Quality Assurance, and Disciplinary matters, which means full compliance with SMO 6.
Since 1 January 1999, every set of financial statements in Kenya must be prepared in accordance with International Financial Reporting Standards (IFRSs). The IASB promulgated the IFRS for Small and Medium-sized Enterprises (SMEs) on 9 July 2009, and ICPAK adopted it shortly after that date. In addition, ICPAK will require all entities to use Environmental, Social and Governance (ESG) Reporting as promulgated by the International Sustainability Standards Board (ISSB) with effect from 1 January 2029. ESG reporting will be mandatory for Public Interest Entities (PIEs) with effect from 1 January 2027. ESG reporting is already mandatory for companies listed on the Nairobi Securities Exchange and for commercial banks; it will become compulsory for insurance companies and Saccos on 1 January 2027. These reporting requirements in Kenya mean that ICPAK complies fully with SMO 7. We must conclude that ICPAK is an IFAC member in good standing.
On 6 May 2026, the International Auditing and Assurance Standards Board (IAASB) released for public consultation an Exposure Draft that proposes revisions to the International Standard on Review Engagements (ISRE) 2410: Review of Interim Financial Information by the Independent Auditor of the Entity’s Annual Financial Statements. These reviews of interim financial statements are not required in Kenya, but some companies listed on the Mauritius Stock Exchange do have their interim financial statements reviewed: if a company engages its auditors to review interim financial statements, they must be reviewed in accordance with the International Standard on Review Engagements (ISRE) 2410. Some years ago, accounting and auditing regulations were seldom changed; today, the situation is very different. However, the proposed revisions to ISRE 2410 represent the first comprehensive review of the standard since its issuance in 2005. These proposed revisions reflect changes in the global environment and improvements to the audit and assurance model made over the last two decades.
One week prior to IAASB’s releasing its latest public consultation, IPSASB released Exposure Draft (ED) 97, IPSAS Practice Statement, Making Materiality Judgments for public comment by August 28, 2026. In October 2018, IASB issued a new definition of Materiality, which required amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. The amended definition of material states that: “Information is material if omitting, misstating or obscuring it could reasonably be expected to influence the decisions that the primary users of general-purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity”. One can conclude that materiality is a fundamental concept in financial reporting, functioning as a filter that ensures the financial information provided is relevant for accountability purposes and useful for decision-making. The IPSASB notes that, in practice, applying this concept can be challenging, and some stakeholders have used the disclosure requirements in IPSAS Standards as a checklist rather than applying professional judgment. On 27 October 2025, IPSASB issued a Definition of Material (Amendments to IPSAS 1, IPSAS 3, and the Conceptual Framework). Ian Carruthers, IPSASB Chair, stated at that time that “The amendments aim to bring consistency into our guidance on the definition of material, helping organisations apply it more effectively. A clear and well-understood definition will serve as a solid foundation for our planned guidance on how to make materiality judgments to be developed during the second phase of this project”. Now, IPSASB proposes non-mandatory guidance in ED 97: the ED describes a practical, four-step approach to identifying, assessing, organising, and reviewing potential material information. The guidance does not change existing requirements but supports more consistent and informed application of materiality across IPSAS Standards.
On 21 May 2026, IFAC reported that Regional and Global Leaders had convened in Buenos Aires, Argentina, to Drive Economic Transformation Across Latin America, a Latin America version of the IFAC conference in Nairobi on 20-21 August 2025. The conference brought together regulators, standard setters, investors, business leaders, and professional accountancy organisations from across Latin America to strengthen trust, transparency, and resilience in the region’s economic and reporting ecosystem. Lee White, the IFAC CEO, whom those who attended last year’s IFAC meeting in Nairobi know, stated in Buenos Aires: “For an international organisation like IFAC, global impact depends on the strength, insights, and leadership of our regions. IFAC Connect Latin America is an important opportunity to listen closely to our members and stakeholders, understand the priorities shaping the profession across Latin America, and work together to mobilise the accountancy profession in support of trust, transparency, and sustainable economic growth. By connecting regional perspectives with global priorities, we can ensure the profession remains relevant, responsive, and united in serving the public interest.”
There are many other matters that IFAC has been dealing with. But including these matters would make this article excessively long. You are now up to date with the main recent developments in IFAC.
