Hong Kong Company Audit

The role of the Hong Kong Audit Report

By preparing a complete audit report early, the company's tax filing process will naturally be more efficient and save unnecessary administrative costs for the company, and the following are other common uses of audit reports:

management company

A Hong Kong company audit report is a feedback on the company's financial status. Maintaining a good audit record is conducive to account management and business operations.

Working with banks to achieve compliance

When a Hong Kong company comes to apply for a Hong Kong bank account, it must prove to the bank that it is compliant and operating legally. In the commercial due diligence of the bank, the Hong Kong company audit report is a necessary information

Investment and subsidies

The audit report of a Hong Kong company can objectively reflect the company's financial status, and a complete set of audit report is essential for enterprises to participate in offshore project investment, apply for government subsidies (e.g. BUD fund) or apply for corporate financing.

Preparing for an IPO

When the company's business is mature, if it wants to expand its scale, it can choose to go public to raise capital, and keeping good records of company accounts is a prerequisite for going public

Hong Kong Company Auditcost

Fees for Hong Kong company audits vary depending on factors such as the size of the audit firm, its experience, the content of its services and the complexity of the company being audited:

Audit requirements: Different audit requirements (e.g., whether a detailed audit is required, whether additional reports are needed, etc.) will also affect the audit fee.

Company size: The larger the company, the more complex its financial data and business activities usually are, and the more expensive the audit will be.

sum or volume of business: The higher the turnover, the greater the volume of data to be reviewed during the audit and the corresponding increase in audit costs.

Complexity of accounts: The audit fee will be relatively high if the company's accounts involve multiple tax years, a large number of business transactions, a complex corporate structure or the need for consolidation of statements.

Contents of Hong Kong Company Audit Report

The Hong Kong company audit report mainly contains the following contents: balance sheet, income statement, tax accrual statement, tax representative's duties, accountant's opinion, and the auditor's description of the whole report.

1) Balance sheetIt reflects the actual assets of the Hong Kong company and is a direct reflection of the creditworthiness of the Hong Kong company. Usually, it is the direct basis for Hong Kong companies to apply for loans or other financial activities from Hong Kong banks.

2) Income StatementIt is a direct reflection of debt solvency. It reflects the profit for the fiscal year, which is the basis for tax assessment and calculation, and is a direct reflection of debt solvency.

(3) Tax calculation formTaximeter is a very important document, is a Hong Kong company tax return link in the self-reporting tax nodes, whether to pay tax, pay how much tax are concentrated here.

4) Audit opinionThe most central element of the entire report. Audit opinions are unqualified and non-standard unqualified (qualified, disclaimer of opinion, adverse).

Types of Audit Reports for Hong Kong Companies

Hong Kong company audit reports are categorized into four main types: unqualified opinion, qualified opinion, adverse opinion and disclaimer of opinion. Different audit opinions represent the degree of approval of the accountant on the company's financial statements, and the Inland Revenue Department (IRD) will refer to the contents of "qualified opinion", "disclaimer of opinion", "adverse opinion" and "unqualified opinion". The content of "qualified opinion", "disclaimer of opinion", and "adverse opinion".

1. Unqualified audit report: The accounting statements of Hong Kong companies follow the Hong Kong Accounting Standards (HKAS) and are complete, clear and without omissions.

2. Qualified audit report: the auditor is of the opinion that the accounting statements are generally fair, but there are issues that need to be adjusted for content.

3. Audit report without opinion: the auditor's disclaimer of opinion is due primarily to uncertainty or unavailability of evidence of significant matters within the accounting statements.

4. Negative audit report: The auditor is of the opinion that the audited Hong Kong company has committed serious irregularities or breaches of accounting standards and issues a negative opinion.

Timing for the issuance of audit reports for Hong Kong companies

The time of issuance of the audit report of a Hong Kong company depends on the date of incorporation and the annual closing date of the company:

Newly established Hong Kong company:The first audit and tax return for a newly established Hong Kong company is due in the 18th month of the company's existence. At that time, the company will receive a tax return from the Inland Revenue Department. The company needs to complete the audit and tax return within 3 months after receiving the tax return and set a financial year end date for the company.

Non-newly incorporated Hong Kong companies:For non-newly established Hong Kong companies, an annual audit and tax return is required to be filed on the company's year-end date and the audit and tax return must be completed within 1 month. If the company's year-end date is in March or December, then it can apply to the Inland Revenue Department for an extension of up to 8 months for the audit and tax return.

Hong Kong company audit basic process and required information

1Information to be provided for the audit

Certificate of Incorporation, Business Registration Certificate, Articles of Incorporation, most recent annual audit documents

Monthly statements of all company bank accounts

Documentation of operations that occurred during the period to which the account belongs, including purchase and sales contracts, shipping documents, etc.

Normal operating expenses (e.g. water, electricity, rent, wages, travel, office supplies, etc.), etc.

Prior year audit report

Profits tax forms issued by the Hong Kong Inland Revenue Department

2Audit by accountants

Provide the information to the accountant, who will audit the accounts and issue the corresponding audit report. When problems arise during the audit process, it is important to make up for the missing information and reply to the questionable accounts in a timely manner, so as to avoid these problems affecting the results of the audit of the Hong Kong company.

3Audit reports issued

The director-shareholder receives the audit report, confirms that it is correct, and then signs it and gives it to the accountant, who signs and stamps it, and at the same time fills in a profits tax form based on the audit report and submits it to the Inland Revenue Department of Hong Kong for tax filing.

Difference between Hong Kong company audit and annual audit

Hong Kong company annual examination is a kind of audit for the company's business license, this kind of audit is once a year. Hong Kong company annual review and Hong Kong company audit, in fact, belong to two completely different company maintenance work.

1. Time

 The annual audit of a Hong Kong company is conducted when the company has been established for one year, and the annual audit, or annual filing, is submitted within 42 days after the anniversary of the company's incorporation.

Hong Kong company audit is the first audit in the 18th month of the company's establishment, and then the annual closing date for the audit of the tax return, Hong Kong companies commonly choose the annual closing date for March 31 and December 31

 2. Nature

Both are maintenance that needs to be done for the later development of Hong Kong company formation. Normal annual audits of Hong Kong companies are required by the Companies Ordinance, and if they are overdue they will incur a fine and even receive a court summons. If the company has not processed the tax form or has not done the audit, there will also be the same fine, in addition, it will also ask for a retrospective audit.

 3. Role

The purpose of the annual audit of a Hong Kong company is for the legal survival of the Hong Kong company, the Hong Kong Companies Ordinance stipulates the necessary procedures.

Hong Kong company audit, on the other hand, is responsible to the shareholders to ensure that the Hong Kong company legal and orderly operation, but also take into account the tax declaration. The Hong Kong company audit report is not only used to file tax returns, but also a powerful supporting document for all aspects of the daily business activities of a Hong Kong company.

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