Auditing Services

Professional Auditing Services Key Takeaways

• An annual audit is legally required for all Hong Kong limited companies under s.405, Companies Ordinance (Cap. 622), regardless of revenue, profit, or activity.
• The only exemption is for companies formally declared dormant under s.447. Being a “small company” does not exempt you from audit.
• The auditor must be an independent, external CPA (Practising) holding a practising certificate from the Accounting and Financial Reporting Council (AFRC). The auditor cannot be the same person who prepared your accounts.
• As your tax representative, we access the IRD’s Block Extension Scheme. E.g. a 31 March year-end usually extends your filing deadline to around mid-November.
• There are four possible types of auditor’s opinion. Each reflecting a different conclusion about your company’s financial statements.

Hong Kong Statutory Audit at a Glance

Every Hong Kong limited company must have its financial statements audited each year by an independent practising CPA, including companies with zero revenue. The only exception is a company formally declared dormant.

Get Started HK manages the whole cycle: appointment of an independent AFRC-registered CPA, document preparation, auditor liaison, tax computation, and filing your Profits Tax Return to the IRD as your appointed tax representative. From HK$1,950 – fixed and agreed before we start.

Regulation	Companies Ordinance (Cap. 622), s.405
Who must comply	All HK incorporated limited companies, any size, any revenue
Only exemption	Dormant companies (s.447 CO) – see our dormant company guide
Who may audit	Independent CPA (Practising), practising certificate issued by the AFRC
Auditing standards	Hong Kong Standards on Auditing (HKSA)
Accounting framework	HKFRS, or SME-FRS if the reporting exemption applies
Filed with	IRD, attached to the Profits Tax Return (BIR51)
Normal PTR deadline	1 month from date of issue
With a tax representative	D-code (Dec year-end) ~31 Aug ; M-code (Mar year-end) ~mid-Nov; M-code loss cases ~1 Feb
Record retention	7 years, as per Cap.112, s.51C

Do You Need an Audit in Hong Kong? Three Different Questions

Most of the confusion in this area comes from mixing up three separate rules. Here’s how they actually work. Two ordinances, two regulators, three questions. The Companies Ordinance (Cap. 622) decides whether your financial statements must be audited, and how detailed they must be. The Inland Revenue Ordinance and IRD practice decide what you hand over, and by when. These are independent of each other, enforced by different bodies, and they do not switch off together. Almost every expensive mistake we see comes from treating them as one rule.

The short answer for a Hong Kong SME: yes, you need an audit, regardless of turnover. Yes, you almost certainly qualify for simplified reporting, which makes it cheaper. And yes, the audited accounts now go to the IRD with your tax return.

Q.1 Do you need an audit at all?

Yes, unless your company is formally declared dormant. Hong Kong has no small-company audit exemption, no turnover threshold, and no exemption for inactive companies. Under s.405 of the Companies Ordinance (Cap. 622), the financial statements of every company formed and registered in Hong Kong must be audited by an independent auditor, every financial year. A company with HK$0 turnover and a company with HK$200 million turnover carry the same obligation. Hong Kong has no small-company audit exemption, no turnover threshold, and no exemption for inactive companies.

The Companies Registry also puts it without qualification:
“Audit of the financial statements is still required for all companies, except dormant companies (section 447), under the new CO.”
Companies Ordinance (Cap. 622): Accounts and Audit

Your situation	Audit required?
Active HK private limited company	Yes, every financial year
No revenue, but bank activity or expenses	Yes
Never traded, never opened a bank account	Yes, unless declared dormant under s.447
Formally declared dormant (special resolution filed)	No, while dormant status holds
HK branch of a foreign company	Sometimes not. The IRD may accept the foreign company’s worldwide audited accounts
Sole proprietorship / partnership	No statutory audit, but accounts are still needed for the tax return

Q.2 Can you use simplified reporting? (This Is Not an Audit Exemption)

Hong Kong’s reporting exemption set out in s.359 to s.366A and Schedule 3 of the Companies Ordinance – lets qualifying private and guarantee companies prepare simplified financial statements and a simplified directors’ report under the SME-FRS (Small and Medium-sized Entity Financial Reporting Standard) instead of full HKFRS.

The audit still happens. The exemption changes what is prepared and how much is disclosed. It does not change whether an independent auditor examines it.

Q.3 Even where it’s not strictly required at times, when should you audit anyway?

Your deadline is set by your financial year-end date, which the IRD converts into an accounting date code. If you appoint a tax representative, which Get Started HK acts as for every audit client, you qualify for the IRD’s Block Extension Scheme.

• Bank account review or trade facility – HK banks routinely ask for audited accounts
• Investor or M&A due diligence – unaudited accounts stall deals
• License conditions – SFC-licensed corporations, money lenders, insurance brokers, travel and employment agencies
• Charities  – accounts support continued exemption
• Overseas parent consolidation – the group auditor’s deadline is usually earlier than yours
• Before deregistration — you cannot cleanly close a company with unfiled audits. See our deregistration service.

Before you choose dormancy

Dormancy is not a shortcut. A company is only dormant if it has no relevant accounting transactions at all. A single bank charge breaks it. You must pass a special resolution, file it with the Companies Registry, and still file Annual Returns and renew your Business Registration. If you expect to trade or receive funds within 12 months, reinstatement will cost you more than the audit would have. Our nil audits start at HK$1,950; talk to us before you resolve to go dormant.

“But I Heard Small Companies Don’t Need an Audit in Hong Kong.”

We hear this one constantly. It’s probably the single most common thing we end up unpicking in a first conversation, and after fifteen years we’ve stopped being surprised by it. The thing is, the founder usually isn’t wrong exactly. They’ve heard something real and half-remembered it. Here’s what’s actually going on. Hong Kong does have a reporting exemption for qualifying small private companies. It’s real, it’s in the Companies Ordinance — simplified financial statements, fewer disclosures, less to pull together at year-end. What it doesn’t do is mean nobody has to audit them. The exemption changes what your accounts look like. It doesn’t change whether they get audited.

The offshore profits claim catches people the same way. If your claim goes through you might pay zero Hong Kong profits tax, and we completely understand why paying for an audit on a nil tax bill feels absurd. But those audited accounts are the entire basis on which the IRD assesses the claim. No audit, nothing to assess. And if you’re sitting there thinking well, we had no revenue at all last year — same answer. Still an audit.

When Is My Audit and Profits Tax Return Actually Due?

Exact dates are issued annually by the IRD to tax representatives. Always check the compliance date printed on page 1 of your return.

Which year-end should you choose?

31 March (M code) gets the longest extension and aligns with the HK tax year. It’s what we recommend to most SMEs. 31 December (D code) makes sense if you consolidate into a calendar-year overseas parent.

Your first audit and first return. Nobody writes to you for 18 months. That’s the problem.

Nobody writes to you for eighteen months.

Most companies that come to us have never filed one. They incorporated, started trading, heard nothing from the IRD for a year and a half, and reasonably assumed there was nothing to do yet. Then the return turns up with a filing date on it.

Five months, for a newly registered company. That’s enough time if the bookkeeping has been kept. It isn’t if it hasn’t, and the reason is that the audit is the short part. Before an auditor can start, someone has to build a full set of accounts for the whole period. That means every bank statement from day one, payments matched to invoices, supplier copies chased for the ones that were never filed, and a decision on each transaction that went through a personal card. On a 18-month first period that work is usually where the time goes, and it is slower than it sounds because the questions come back to the client. Who was this payment to. Was this a loan or capital. Do we have the contract.

The part worth taking away: the obligation attaches to your first year-end, not to the tax envelope. The IRD says so itself — “taxpayers should not wait for the issue of Profits Tax returns to prepare annual audited accounts.”

Nobody is obliged to warn you it’s coming. Not the IRD. But that’s the part of the job we treat as ours: knowing when your first return is due, what can be extended, and having the books in a state where the audit is three weeks rather than three months.

What late filing actually costs

• The IRD may assess tax on assumed profits under IRO s.59(3). You pay first and object afterwards — cash out the door on a figure unrelated to your actual results.
• Failure to file without reasonable excuse can attract a fine and, on conviction, an order to pay up to treble the tax undercharged (IRO s.80(2)).
• Two or three unfiled years usually cost more in catch-up fees and penalties than the original audits.

What We Need From You: Full Document Checklist

Realistic time commitment: 8 to 20 hours for a SME with organised records, spread over 3–4 weeks. First-ever audits: 20–40 hours. Cloud bookkeeping roughly halves it.

Banking & payments: monthly statements for every account, full year (bank PDFs, not screenshots); Stripe, PayPal, Airwallex, Wise, Alipay, WeChat Pay statements; loan and facility agreements; explanations for transfers to or from directors and related companies

Revenue: sales invoices and sales listing; customer contracts or POs for material sales; shipping/delivery documents or service completion evidence; platform settlement reports (Amazon, Shopify, Taobao)

Costs: purchase invoices and supplier statements; expense receipts; office lease; Business Registration Certificate; professional fee invoices

Payroll: payroll summary; employment contracts; MPF contribution records; director remuneration

Balance sheet: fixed asset invoices and disposals; year-end stock count sheets and valuation basis; receivables and payables listings; loan agreements, including director and related-party loans, in writing

Statutory & prior year: prior year audited accounts and tax computation (or incorporation documents for a first audit); IRD correspondence including any PTR issued

If claiming offshore profits: evidence of where contracts were negotiated and concluded; travel records; correspondence; where operations were performed

From thousands of Hong Kong audits each year, we see the same pattern: roughly 70% of delays stem from just three document gaps — incomplete expense receipts and petty cash vouchers, missing contractor or supplier invoices, and inadequate investment, fixed-asset or director-loan records. Sort these out before fieldwork starts and the majority of SME audits proceed smoothly and finish faster.

The Four Types of Auditor’s Opinion

Unqualified opinion (Clean opinion) The best outcome, and usually required by investors. The auditor is satisfied that the financial statements are fairly and appropriately presented, and that the accounts were prepared in accordance with Hong Kong accounting standards.

Qualified opinion The auditor’s judgment was affected by certain limitations, but those limitations are not material enough to invalidate the overall statements. A common example is a few missing receipts. This is actually quite common among startups and early-stage businesses, so it is nothing to be alarmed about.

Adverse opinion Unlike a qualified opinion where only certain areas are in question, an adverse opinion means the auditor has concerns about the financial statements as a whole. This is a serious warning.

Disclaimer of opinion The auditor was unable to form a conclusion because key evidence was unavailable. For example, if a company loses all its invoices and receipts and cannot recover them. The auditor has no basis to make a valid comment on those figures.

For most well-run businesses, an unqualified opinion is the expected result whilst qualified opinions are also very common for SMEs.

The disclosure nobody warns you about

Separate from the opinion type, an auditor may add a material uncertainty related to going concern paragraph if the company is loss-making, has net liabilities, or depends on shareholder funding. This is very common for startups and is not a qualified opinion.

It’s usually resolved with a written letter of financial support from the parent or shareholder, confirming funding for at least 12 months from the reporting date, plus a short cash flow forecast. Prepare this early. Chasing it late is one of the most common causes of missed HK filing deadlines.

Who Is Legally Allowed to Audit a Hong Kong Company?

Your auditor must hold a practising certificate as a CPA (Practising), and the firm must be a registered practice unit. Since 1 October 2022, both are issued and maintained by the Accounting and Financial Reporting Council (AFRC), Hong Kong’s independent regulator of the accounting profession. The HKICPA remains the registration authority for CPA membership and issues the Hong Kong Standards on Auditing, under AFRC oversight.

Verify any auditor in three minutes

1. AFRC register – confirm the individual holds a current practising certificate and the firm is a registered practice unit
2. HKICPA member register – confirm CPA membership
3. Ask for the practising certificate number and the name of the signing engagement partner. A reputable firm gives you both without hesitation.

Red flags

• “Our accountant signs off the audit”. A non-practising CPA cannot issue an auditor’s report
• The same person who did your bookkeeping signs the auditor’s report
• No named signing partner on the engagement letterA fee quoted before anyone has asked about your transaction volume

How we keep this clean

The Companies Ordinance prohibits the same person from both preparing and auditing financial statements. Our accounting team prepares your accounts; a separate, independent AFRC-registered CPA performs the audit. You get one point of contact and one timeline, with the independence wall exactly where the law requires it. 

Six Situations That Could Complicate a Hong Kong Audit

1. Claiming offshore (non-HK sourced) profits. An offshore claim does not remove the audit requirement. Audited accounts are what the claim is built on. The auditor will look for evidence of where contracts were negotiated and concluded, where operations occurred, and where decisions were made. Weak documentation is the leading cause of failed claims. Build the evidence file during the year, not after.

2. Mainland China–related transactions. Sales to or purchases from a related PRC entity draw the closest attention. Expect requests for written intercompany agreements, transfer pricing rationale, fapiao or customs documents, and year-end balance confirmation. Get the agreements signed before year-end.

3. Cryptocurrency and digital assets. Exchange statements alone are not audit evidence. Expect wallet addresses and on-chain verification, a documented valuation basis at the reporting date, and an explanation of accounting treatment. Budget extra time and fee. (Relevant if you set up via our crypto collection and payments route.)

4. E-commerce across multiple platforms. Gross platform sales, platform fees, refunds, chargebacks and FX settlement each need separating. Auditors reconcile settlement reports to bank receipts. If you only keep net deposits, revenue completeness can’t be tested.

5. Loss-making companies funded by shareholders. Triggers a going-concern assessment. Prepare a written letter of financial support covering 12 months from the reporting date, plus a cash flow forecast.

6. Two or more years overdue. Audits must be done in sequence, because each closing balance is the next year’s opening balance. Three overdue years is three audits, not one. It is usually with estimated assessments already issued and penalties to negotiate. We handle catch-up filings regularly; the earlier you start, the cheaper it is.

First Audit Ever? What Actually Happens

A first audit is harder than later ones because there’s no audited opening balance to rely on. The auditor verifies the opening position from source documents.

The five blockers we see most:

1. No fixed asset register — equipment bought over two years, no schedule, missing invoices
2. Director loans with no agreement, no interest terms, no board minute
3. Personal and company spending mixed on one card
4. Cash sales with no sequential invoicing
5. Cut-off errors. E.g. December sales invoiced in January

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Frequently Asked Questions

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If you’re still in the early stages of setting up your business, our company formation packages include guidance on structuring your accounts correctly from the start, so your first auditing service goes smoothly.