Audit Report Requirements in Hong Kong

In Hong Kong, all businesses need to get their financial reports audited every year by a registered third-party auditor to comply with the law and fulfill tax obligations. 

Auditing ensures that the financial reports are accurate and unbiased, including balance sheets, income statements, equity changes, and cash flow statements. Global Core can help businesses manage the audit process efficiently and reduce costs.

When Do You Need to Do an Audit Report?

According to the Hong Kong Companies Ordinance, all company audit reports in Hong Kong must be carried out by a Hong Kong practising Certified Public Accountant (CPA) on an annual basis. You need an audit report to file your Profits Tax Return (PTR), which is sent to you by the IRD. The audit reports and PTR must be submitted according to the required deadline based on the company’s year-end date.

If you have just incorporated your company, the PTR form will take around 18 months to arrive. Once you have your PTR, you submit it along with the audit report and tax computation.

Types of Audit Opinions

In Hong Kong, there are four types of audit opinions or audit reports:

1. Unqualified audit report: This report indicates that the auditor has given the company’s financial statements a passing grade, which means the accounts comply with Hong Kong’s accounting standards.
2. Qualified audit report: A qualified opinion means that the financials are fairly presented, except for a specified area. Even though it’s a step down from an unqualified report, it’s still acceptable to lenders, creditors, and investors.
3. Adverse audit report: An adverse opinion means 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: This is a non-opinion, and auditors give a disclaimer of opinion if they have not been allowed or able to carry out their planned audit procedures. This can be rectified if the planned procedures can take place.

Documents Required for Auditing in Hong Kong

• Financial statements, including balance sheet, income statement, and general ledger of business transactions, if possible.
• Supporting documents for the financial statements.
• Accounts for review.
• Relevant accounting documents, such as bank statements, purchases invoice/subcontractor’s invoices, financial statements/management accounts, expense receipts, merchant account statement, sales invoices/consulting service invoices/contracts, and any other necessary accounting documents.

Choosing a Qualified Audit Firm/Service Provider

When selecting an auditor, you should ensure that the person or provider is a Hong Kong CPA, registered with The Hong Kong Institute of Certified Public Accountants (HKICPA). It is important to confirm that the auditor is licensed and has a valid membership with the HKICPA. Our company, Global Core, meets this requirement as we have a team of Hong Kong CPAs who are registered with the HKICPA and comply with all professional standards.

Reducing Audit Costs

You can reduce the costs of an audit report by being organized. If your accounts are messy and paper-based, auditors will need more time to check your accounts, which leads to higher fees. Simple ways to reduce the time an audit report takes include:

1. Asking your auditors for a list of what they need before the audit begins. This is especially important if it’s your first time, as ticking all the boxes can make the process go much quicker.

2. Preparing your financial statements before the audit starts. If possible, send them to your auditor before they start doing fieldwork.
3. Storing your data digitally and using accounting software. This saves time as paper files can get lost and take more time to process.
4. Having regular work in progress (WIP) catchups with your auditors. This ensures nothing gets delayed, and you can monitor costs.

How Global Core Can Help You with Your Audit Report

Global Core provides a fully IRD-compliant audit service, with an experienced and qualified team to help you manage your audit report from start to finish. Here’s how it works:

1. Get an instant quote from Global Core, which mainly depends on your company’s revenue, complexity, business model, and risk. The bigger your revenue, the more complex the audit. But Global Core commits to providing an instant quote.
2. Audit report preparation begins, and you can agree on the timescales before the audit takes place to set proper boundaries.
3. The audit report takes place, and all of the admin, tax reporting, and audit reporting are handled by the auditor.

Conclusion

In summary, as a business owner in Hong Kong, it’s essential to have your financial audit reports reviewed by an independent party to comply with Hong Kong’s tax regime. By understanding the audit process, choosing a qualified audit firm/service provider, preparing your documents, and reducing audit costs, you can make the audit process more efficient and cost-effective. Global Core can help you with your audit report and make the process stress-free.