Abstract: The researcher investigated “effect of external audits on growth of small and medium enterprises using a case study of Nile energy limited, Kireka road, Kampala.” The study was guided by three research objectives which were; to determine the challenges facing external auditors at Nile energy limited, Kireka road, Kampala, to find out the solutions to the challenges facing external auditors at Nile energy limited, Kireka road, Kampala and to establish the relationship between external audits and growth of Nile energy limited, Kireka road, Kampala.