Hong Kong Audit Report Requirements 101

In Hong Kong, all business owners must get their financial audit reports checked by someone outside the business. This requirement exists, no matter what stage your business is at. It also applies to all Hong Kong incorporated businesses – whether you trade in Hong Kong or overseas.

The financial audit report requirement exists to ensure compliance with Hong Kong’s tax regime. There are hundreds of thousands of companies in Hong Kong, meaning the Internal Revenue Department (IRD) can’t feasibly check every business. So company audits are a way to manage tax compliance efficiently.

When Do I Need To Do an Audit Report?

Company audit reports in Hong Kong are annual. According to the Hong Kong Companies Ordinance, these audits must be carried out by a Hong Kong practising Certified Public Accountant (CPA).

You need an audit report to file your Profits Tax Return (PTR). Your PTR is sent to you by the IRD. Companies are required to submit the audit reports and PTR according to the required deadline, which is based on the company’s year-end date. (Click here for the PTR deadlines with regards to the company year-end date).

If you have only just incorporated your company, this form will take about 18 months to arrive. You are required to submit the PTR then. Once you have your PTR, you submit it along with the audit report and tax computation.

What Are the Four Types of Audit Opinions That Auditors Would Provide on an Audit Report?

In Hong Kong, there are four types of audit reports (or ‘audit opinion’ as it’s known technically).

1. Unqualified audit report

With this report, the auditor gives the company’s financial statements a passing grade. An unqualified opinion means the auditor believes that the accounts comply with Hong Kong’s accounting standards.

2. Qualified audit report

This is one step down from an unqualified report. A qualified opinion means the auditor believes the financials are fairly presented, except for a specified area. A qualified report is still acceptable to lenders, creditors and investors.

3. Adverse audit report

An adverse opinion indicates that a company's financial statements are misrepresented, misstated, or inaccurate. This result can seriously damage the company, financially and reputationally.

4. Disclaimer audit report

Essentially, this is a non-opinion. Auditors give a disclaimer of opinion if they have been allowed or able to carry out their planned audit procedures. This can be rectified if the planned procedures can take place.

How Do I Choose a Qualified Audit Firm/Service Provider?

There is one absolute requirement when choosing an auditor: The person or provider must be a Hong Kong CPA.

CPAs are registered with The Hong Kong Institute of Certified Public Accountants (HKICPA). HKICPA is the statutory body that registers accountants, issues practising certificates, and regulates members’ professional standards and conduct.

You can confirm whether someone is a CPA by searching the HKICPA’s website.

How Can I Reduce Audit Costs?

Cutting costs for audit reports comes down to organisation. If your accounts are messy and paper-based, the auditors will need more time to check your accounts.

More time means more fees. Simple ways to reduce the time an audit report takes are:

• Ask your auditors for a list of what they need before the audit begins. Especially if this is your first time. If you tick all the boxes, the process will go much quicker.
• Have your financial statements prepared before the audit starts. If possible send it to your auditor before they start doing fieldwork.
• Store your data digitally and use accounting software. Paper files get lost and take more time.
• Have regular work in progress (WIP) catchups with your auditors. This ensures nothing gets delayed and you can monitor costs.

How To Do an Audit Report?

Osome provides a fully IRD compliant audit service. And we do it in an efficient, transparent way.

Here’s the process of preparing an audit report:

• You get an instant quote from the specialist. The price mainly depends on your company's revenue, complexity, business model and risk. The bigger your revenue, the more complex the audit. But still, we commit to providing an instant quote.
• Submit your documents. Once you’ve confirmed the audit engagement, the auditors collect your documents via the Osome platform.
• The process of audit report preparation begins! Agree on the timescales before the audit takes place. This sets proper boundaries.
• The audit report takes place. All of the admin, tax reporting and audit reporting should be handled by the auditor.

Change Your Audit Report to Osome

We make switching your audit to Osome easy. To switch auditors, certain paperwork is required.  What’s known as a ‘clearance letter’ is needed between Osome and your old auditor.

We handle this admin for you. You’ll be able to switch effortlessly with minimal disruption to your business.

If you are uncertain about when and how you should start the auditing for your business, schedule a free consultation with us. Our experienced team will recommend the best solution for your business, so you can stay hassle-free and concentrate on your business.