10 Things Somali Companies Must Do Before an External or Internal Audit

INTRODUCTION

Somalia’s private sector is growing fast. But one challenge continues to affect almost every business: audit readiness.
Most companies wait until auditors arrive to start organizing documents, reconciling accounts, or looking for old invoices. This creates delays, extra costs, and serious findings that could have been avoided.

AIFA prepared this guide to help Somali organizations — whether family businesses, medium-sized companies, NGOs, or large corporations — understand what proper audit preparation looks like in our context.

1. Know Why the Audit Is Being Done

In Somalia, audits are often requested by:

• Donors
• Banks
• Investors
• Boards of Directors
• Internal management
• Regulatory bodies

Because our market is still developing, many companies see the audit as a threat instead of a trust-building tool.

External Audit in the Somali Context

External audits are especially important because:

• Most companies lack formal systems or ERPs.
• Investors and partners rely heavily on credibility.
• The financial sector demands transparency to reduce fraud and money-laundering risks.
• NGOs are accountable to donors and beneficiaries.

Internal Audit in the Somali Context

Many Somali companies operate with minimal documentation, cash-based transactions, and limited segregation of duties. Internal audits help fix these issues before they become financial losses or compliance threats.

2. Assign an Audit Coordinator

Most Somali companies do not have a designated person who manages the audit. Usually, work gets passed around between accountant → cashier → manager → HR → one staff who left last year. This confusion slows down the audit.

A coordinator should:

• Collect documents
• Communicate with auditors
• Follow the audit checklist
• Ensure departments respond on time
• Maintain a single audit file

In Somali businesses, having one responsible person can reduce audit delays by over 50%.

3. Prepare Your Financial Records Before the Auditors Arrive

Many Somali businesses operate with:

• Missing receipts
• Unrecorded cash sales
• Manual Excel sheets
• No monthly closing
• No documented approvals

To avoid audit problems, prepare:

• Complete general ledger
• Updated cashbook
• Reconciled bank statements
• Customer & supplier lists
• Fixed asset register
• Payroll files
• Debt/loan agreements
• Previous audit reports

Auditors in Somalia frequently find incomplete documents — preparing these early prevents qualifications and reputation damage.

4. Reconcile Everything in Advance

Reconciliation is usually the largest gap in Somali organizations.

Bank Reconciliation

Most companies do not reconcile monthly, creating unexplained differences. Auditors will challenge any mismatch.

Cash Reconciliation

Somalia is heavily cash-based. Petty cash must be counted and matched to the ledger.

Inventory Reconciliation

From supermarkets to construction suppliers, inventories are often not controlled. Count them and document the results.

Receivables & Payables

Many Somali companies sell on credit without written contracts, which creates disputes during audit.

Confirm balances before the auditors do.

Reconciliation builds trust and reduces audit hours.

5. Review Internal Controls & Processes

Because Somali businesses grow quickly — often family-managed — internal controls are usually weak.

Typical gaps:

• One person controls both cash and bank
• No approval limits
• No segregation between procurement, finance, and store
• Informal payroll systems
• No documented policies
• Password sharing on accounting systems

Before the audit, review controls in:

• Procurement
• Sales & revenue collection
• HR & payroll
• Inventory
• Asset management
• IT access

This step is critical for internal audits and reduces major findings.