In Hong Kong, all companies are legally obliged to conduct an annual audit of their financial reports. These statutory audit reports involve an independent examination of the company’s financial statements to comply with the disclosure requirements outlined in the Hong Kong Companies Ordinance and the tax obligations specified in the Inland Revenue Ordinance. The financial reports subject to audit encompass essential statements such as the balance sheet, income statement, statement of changes in equity, and cash flow statement. The audit process is performed by a third-party auditor to ensure the financial records are presented fairly and accurately, without any bias.
Beyond fulfilling tax and reporting obligations, auditing plays a vital role in aligning your business with its goals. Let our auditing services help to add credibility to information provided to shareholders, giving assurance to investors and financial personnel to make decisions with confidence.
The Need for Auditing
Hong Kong Auditing Services that We Provide!
Our audit services in Hong Kong consist of a vast variety to cater to the specific needs of your organization. Among others, these are the services that we perform:
With our comprehensive audit services, we help you maintain transparency, uphold regulatory requirements, and reinforce the trust and confidence of stakeholders in your financial operations.
Audit Exemptions – Are There Any?
All Hong Kong companies must complete annual audited accounts. There is no small company exemption.
The only exception is for Dormant Companies pursuant to Section 447 of the Companies Ordinance. Dormant Companies are companies that not performing any form of business activity or receiving income of any form at present.
Reporting Exemptions
While there is no exception to audits, companies may be eligible to certain reporting exemptions and simplified reporting standards. “Reporting exemption” refers to the privileges available to private or guarantee companies, except certain excluded entities, that qualify for simplified accounts reports, directors’ reports and auditor’s reports.
In terms of auditor’s reports, the auditor’s report for those with this exemption will address whether the financial statements have been “properly prepared.” However, the auditor will refrain from providing an opinion on whether the financial statements “give a true and fair view”.
The types of companies and their eligibility for such exemption under Section 359 of the Companies Ordinance is illustrated in the table below:
| Category | Requirements |
|---|---|
| Small Guarantee Companies and Groups |
|
| Small Private Companies and Groups |
|
| Larger “Eligible” Private Companies and Groups |
|
You can refer to the New Hong Kong Companies Ordinance Briefing Note for more information.
Why You Should Conduct A Company Audit
Conducting a company audit, beyond obligation offers numerous advantages that should not be overlooked. When you engage an audit firm in Hong Kong, these six benefits can be expected:
- Brand and information credibility
An audit adds a layer of credibility to your company’s financial information, assuring shareholders, investors, and other stakeholders. It demonstrates your commitment to transparency and accuracy, enhancing your reputation in the marketplace. - Deter and detect fraud and error
An audit helps identify potential instances of fraud or error within your organization. Through rigorous examination of financial records and internal controls, auditors can uncover irregularities, deter fraudulent activities and ensure the integrity of your financial reporting. - Enable compliance with banking covenants
Many banking institutions require audited financial statements as a condition for providing loans or extending credit facilities. By conducting an audit, you fulfill these banking covenants, ensuring continued access to necessary financial resources. - Facilitate timely and accurate payment of taxes
Audited financial statements provide a reliable basis for calculating and reporting taxes. With accurate financial records, you can minimize the risk of errors and discrepancies in tax calculations, ensuring compliance with tax laws and regulations. - Demonstrate good corporate governance and citizenship
Conducting a company audit showcases your commitment to good corporate governance practices. It highlights your dedication to transparency, accountability, and ethical conduct, fostering trust among stakeholders and showcasing your commitment to being a responsible corporate citizen.
Articles about Auditing in Hong Kong
Get more insights to auditing in Hong Kong with these articles compiled by our team of experts.
