Hong Kong Company Audit: How to make sure your business meets local requirements
A topic that is not often talked about when doing business in Hong Kong is the requirements that are imposed after the first year of work.
This is less discussed as people focus on the benefits of doing business in Hong Kong. However, it cannot be ignored as it can have a significant impact on your business.
This article will focus specifically on conducting a compulsory audit in this regard, which is stipulated in the Hong Kong Companies Ordinance and which is required by law to be conducted once a year for Hong Kong registered companies.
This article will focus specifically on conducting a compulsory audit in this regard, which is stipulated in the Hong Kong Companies Ordinance and which is required by law to be conducted once a year for Hong Kong registered companies.
What is a Hong Kong audit?
An audit is an official examination of a company's financial statements conducted by the Hong Kong government or a private accounting firm. The purpose of the audit is to ensure that the company complies with all relevant laws and regulations.
An audit report is a document prepared by an auditor at the end of a review of business documents. The report states whether the financial statements are free of material misstatement.
An audit report is a document prepared by an auditor at the end of a review of business documents. The report states whether the financial statements are free of material misstatement.
What is an audited financial report?
A financial report he consists of three sections.
By auditing financial statements, businesses can ensure that their records are accurate and comply with requirements. For more information on the auditing standards implementation process, please see below.
- Balance Sheet: This shows the company's assets, liabilities and equity for a specific period of time. This section will help you get a better sense of the company's capital structure.
- Income Statement: Reflects the company's profits, expenses, losses and profits. In summary, it shows your net profit after deducting expenses for a specific period.
- Cash Flow Statement: Represents a company's cash position, showing cash flows and their use. For example, debt settlement and operating expenses. Generally, once financial statements are prepared by a qualified accountant, they can be audited.
By auditing financial statements, businesses can ensure that their records are accurate and comply with requirements. For more information on the auditing standards implementation process, please see below.
How does the examination in Hong Kong work?
The process in Hong Kong depends on the exam being administered. However, they all follow these common steps:
- Appointments among all relevant shareholders
- Process plan
- Conduct financial reporting
- Result report
What is the purpose of preparing audited financial statements?
This is not only a mandatory requirement of the Companies Act, but also an essential part of complying with the regulations laid down in Hong Kong. This process typically involves the following steps:
Ultimately, the audit report is the most important factor that enables companies to file their income tax returns. Hong Kong's tax system is regulated by the Hong Kong Inland Revenue Department, which checks whether companies file their tax returns in a timely manner. Additionally, a verified financial report serves as a supporting document for the company. This is required by banks and other local authorities such as the Companies Registry, especially if the company's shareholders have changed.
- Collection of management accounting records and all supporting documentation.
- Preparation for annual accounting.
- Submit the financial report to a Hong Kong CPA for review.
- Obtain auditor feedback to clarify questions or missing documentation confirming disclosures made in the financial statements.
- Finally, after your financial statements have been audited and the required audit report prepared, you can submit that document to the Internal Revenue Department (IRD) along with your income tax return.
Ultimately, the audit report is the most important factor that enables companies to file their income tax returns. Hong Kong's tax system is regulated by the Hong Kong Inland Revenue Department, which checks whether companies file their tax returns in a timely manner. Additionally, a verified financial report serves as a supporting document for the company. This is required by banks and other local authorities such as the Companies Registry, especially if the company's shareholders have changed.
If you would like to know more about bookkeeping and accounting policies in Hong Kong, you can contact us for consultation.