Company Audits in Hong Kong

A financial audit is conducted by an auditor to provide an opinion on whether financial statements (the information is verified to the extent of reasonable assurance granted) are stated in accordance with Accounting Standards. The auditor gathers evidence to determine whether the statements contain material errors or other misstatements.

Yes, all limited companies incorporated in Hong Kong, including those operating overseas, need to go through the annual process to audit their company accounts. This is a legal requirement for all limited companies in Hong Kong (according to Hong Kong Company Ordinance and Inland Revenue Ordinance), so it's mandatory to file a Statutory Audit in accordance with the Hong Kong Financial Reporting Standards.

The management reports and accounting records would be audited by an independent CPA (Practising) supported by sufficient audit evidence for the CPA to give an audit opinion whether financial statements (the information is verified to the extent of reasonable assurance granted) are stated in accordance with Accounting Standard and free from material misstatement.

The auditor would start the audit by understanding the business of the company. Follow by collecting the documents as audit evidence such as invoices, goods delivery and receipt notes, sales and purchases contracts, purchase orders, sales orders, rental agreements, bank-in slips, bank statements, bank loan agreements, financial breakdowns to support the figures disclose in the financial statements. In addition, audit confirmation would be performed with a bank, account receivable and payables to verify year-end balances. Of course, some other auditing testing and audit procedures would be performed as well. Enquiries would be made to the management during the audit. The auditor would give an audit opinion in the audit report whether financial statements are fairly stated in accordance with Accounting Standards, and whether the statements contain material errors or other misstatements.

After completing the audit, an auditor would prepare an audit report with tax computation and complete profits tax return for company directors’ review and confirmation. The company directors will then sign the audit report. This, along with your PTR, is sent to the government – Hong Kong Inland Revenue Department (IRD) to keep on record.

An auditor is an independent Certified Public Accountant (Practising) registered in HKICPA, who is qualified to provide the audit services for companies in Hong Kong. An audit report would be prepared by the auditor and audit opinion would be given there based on their findings after completing the audit.