Audit Arrangements for Hong Kong Companies to Comply with Companies Ordinance

According to the Companies Ordinance, every limited company established in Hong Kong must prepare an annual financial statement audited by an independent third-party certified public accountant. The company’s board of directors must submit the audit report to shareholders at the annual general meeting and the Inland Revenue Department (IRD). The IRD will then use the audit report to assess the profits tax of the company.

One Success’s accounting team has been responsible for the accounting, audit arrangements and consultation for numerous Hong Kong companies and is a trustworthy partner for SMEs in completing the statutory audit.

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Comprehensive Audit Arrangement Service

Audit Arrangement for Limited Companies in Hong Kong

Every limited company must conduct a statutory audit once a year in accordance with the Company Ordinance.

Audit Arrangement for Revenue Recognition

On some occasions, business property owners in Hong Kong require tenants to provide a revenue audit report to calculate a part of the rent they have to pay.

Audit Arrangement for Government Funding Application

When applying funding programs such as the SME Export Marketing Fund (EMF) and Distance Business Program (D-Biz), companies must submit audited financial statements.

Audit Arrangement for Fundraising Activities

Charities that hold flag selling and fundraising activities must provide an audit report to the Social Welfare Department or relevant governmental organizations.

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Let Professionals Complete Statutory Audit for You

SMEs or startups may not understand the statutory audit process thoroughly. One Success’s professional team will assist you in completing all the process step-by-step.

When does a Hong Kong limited company need audit services?

As required by the Inland Revenue Department, Hong Kong companies must conduct audits before submitting their tax returns. SMEs should start their auditing in advance of the tax season each year.

Hong Kong companies are free to choose the financial year-end date, and the most common ones being March 31 or December 31 each year. A new company ordinarily receives its first profits tax return in the 18th month after it is incorporated. After that, it receives the profits tax return once a year, mostly in early April each year.

The IRD usually requires companies to submit their tax returns together with the audit report within a specified time limit (three months for the first tax filing and one month thereafter).

Late filing of the tax return may lead to penalties, including being fined or suffering lawsuit. SME owners can already start seeking audit services before receiving the tax return.

SMEs owners can contact One Success at any time so we can provide you with advice and help you prepare documents as early as possible to complete the statutory audit on time. We can also be your tax representative and apply for an extension of tax payment when necessary.

What should be included in the audit report of a Hong Kong limited company?

A complete financial audit report must include documents regarding a company in the fiscal year:

  • Balance Sheet
  • Income statement
  • Cash flow statement
  • Statement of Changes in Equity

The audit report must be reviewed by an independent third-party accountant. Companies are advised to hire a professional accountant to handle accounting and auditing in a one-stop manner to avoid confusion when the tax season comes.

Generally, what documents are required to prepare a financial report?

To ensure a smooth audit process, the company need to provide a series of documents to its accountant.

One Success provides a clear list of documents to all our client according to their business and taxation needs so that clients do not have to bother to study complex compliance stuff.

Some documents (original or copy) that are commonly used for preparing audit report include:

  • Copies of company registration documents including business registration certificate, company registration certificate, articles of association and annual report
  • List of shareholders and share information
  • Receipts of company expenses
  • Various types of contracts, including employment and service contracts
  • Monthly bank statement of business account
  • Invoices for purchases and sales
  • Financial information of affiliated companies
  • License or permit certificate held by the company such as the license from the Securities Regulatory Commission

The documents needed by a company to prepare its audit report may vary. We will assist you throughout the process to simplify your workflow.

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Make Good Use of Cloud Accounting Software for Daily Accounting

Make Good Use of Cloud Accounting Software for Daily Accounting

Keeping financial documents in an orderly manner is not easy for SME managers overwhelmed by loads of work. We recommend SMEs use cloud accounting software to store all the expenditure receipts, invoices, payslips and all vital financial records in a perfect digital format.

When the tax season comes, all you have to do is export the records to file your tax returns. You will also be able to keep track of the company’s financial performance clearly and quickly.

Frequently Asked Questions About Auditing for Hong Kong Companies

A: Accounting refers to the company’s daily records, such as salary payments, purchase fees, and sales revenue. Auditing refers to collecting and analyzing financial records to assess the authenticity of the company’s financial statements. The statutory audit of Hong Kong companies must be performed by an independent third-party accountant.

A: For the first two million dollars of profits of Hong Kong companies, the current profits tax rate is 8.25%, and the subsequent tax rate is 16.5%. All income earned in or derived from Hong Kong is taxable. There are no sales tax, value-added tax, capital gains tax or dividend tax in Hong Kong.

A: The Inland Revenue Department generally gives companies a one-month deadline to submit the tax returns.

If a company fails to submit it on time without making a reasonable explanation, the Inland Revenue Department will issue tax assessment based on past records to assess the profits tax that the company needs to pay.

If the company does not object, IRD’s estimation will be judged as the final tax assessment result. Meanwhile, the company owner may be fined, and if he does not pay the fine on time, he will receive a court summons and risk further legal consequences.

A: Companies may need auditing services to serve the following purpose: valuation for mergers and acquisitions or sales of business, internal evaluation of corporate performance, application for government funding, and rent calculation based on turnover.

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