Audit and Compliance in Hong Kong

Audit and Compliance in Hong Kong

It is crucial to have a comprehensive grasp of the specific accounting, bookkeeping, and auditing standards applicable to reduce the chances of making mistakes when doing business in Hong Kong.


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The Hong Kong Institute of Certified Public Accountants is the sole authorized organization responsible for registering and certifying accountants in Hong Kong. This institute issues the Hong Kong Standards on Auditing, Quality Control, Assurance, and Related Services, which are used for the annual tax assessment conducted by the Inland Revenue Department (IRD).

Members of the Hong Kong Institute of Certified Public Accountants (HKICPA) are obligated to adhere to these accounting and auditing standards.

Regarding auditing regulations in Hong Kong, companies incorporated in Hong Kong are required to have their financial statements audited by a registered and certified public accountant.

Who needs to conduct financial audits in Hong Kong? 

Under Hong Kong’s Companies Ordinance (CO), a yearly statutory audit of financial statements is required for all companies. This includes companies eligible for certain reporting exemptions and simplified reporting procedures but excludes dormant companies. The audits must be conducted in accordance with the disclosure requirements of the CO.

In addition to the yearly statutory audit, the Inland Revenue Ordinance (IRO) requires corporations in Hong Kong to submit audited financial records and an auditor’s report as supplementary material when filing their PTR. As of April 1, 2023, small companies with a gross income of under HK$2 million (approx. US$250,000) are also required to submit audited financial statements along with the PTR. 

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All required supplementary and other forms must be submitted electronically. The tax return and supporting documents can be submitted on paper, with a signed Control List for supplementary form uploaded.

Dormant companies, companies incorporated in a jurisdiction that don’t require audited financial statements, and Hong Kong branches of a foreign company are not required to submit audited financial statements and an auditor’s report along with the PTR. 

However, it is important to note that Hong Kong branches of foreign companies are only exempt from submitting audited financial statements and an auditor’s report if the following information is submitted along with the tax return: 

  • The place of incorporation of the foreign company; 
  • Whether the laws of that country require a statutory audit of the worldwide financial statements of the company;
  • Whether that audit has been conducted; and
  • A brief summary of the financial and accounting records maintained by the Hong Kong branch. 

Audit Requirements for Companies in Hong Kong


Requirements under the Companies Ordinance (CO) 

Requirements under the Inland Revenue Ordinance (IRO) 

Type of audit 

Yearly statutory audit 

Statutory audit for PTR filing 

Mode of submission 

To the company members at the company AGM or other general meeting 

Along with the PTR to the Hong Kong Inland Revenue Department 

Timeline for submission 

Within nine months after the company’s financial year-end 

Within one month from the date of issue of the PTR; or, if granted an extension: 

  • August 15 (for companies with financial year-end of December 31); or 
  • November 15 (for companies with financial year-end of March 31).


All companies, excluding: 

  • Dormant companies.

All corporations, excluding: 

  • Dormant companies; 
  • Companies incorporated in a jurisdiction that doesn’t require audited financial statements; and 
  • Hong Kong branches of foreign companies (provided certain information is provided with PTR).

Auditing and assurance standards

The established guidelines for auditing and assurance in Hong Kong are referred to as the "Hong Kong Standards on Quality Control/Management, Auditing, Assurance, and Related Services."

The introduction to these standards outlines the Institute Council's objectives and the prescribed procedures concerning the Hong Kong Standards on Quality Control/Management, Auditing, Assurance, and Related Services.

The term "Hong Kong standards on quality control, auditing, assurance, and related services" includes:



Hong Kong standards on quality control/management (HKSQCs/HKSQMs)

HKSQCs and HKSQMs establish fundamental principles and essential procedures while offering guidance on a firm's quality control and management responsibilities per Hong Kong engagement standards.

Hong Kong framework for assurance engagements

HKSAs, HKSREs, HKSAEs, HKSIRs, and HKSRSs are collectively referred to as the Hong Kong engagement standards.

Hong Kong standards on auditing (HKSAs)

HKSAs are used when auditing historical financial information.

Hong Kong standards on review engagements (HKSREs)

HKSREs are applied when reviewing historical financial information.

Hong Kong standards on assurance engagements (HKSAEs)

HKSAEs should be used in assurance engagements that involve subject matters other than historical financial information.

Hong Kong standards on investment circular reporting engagements (HKSIRs)

HKSIRs are utilized in engagements related to investment circular reporting.

Hong Kong standards on related services (HKSRSs)

HKSRSs are applied in compilation engagements, engagements for applying agreed-upon procedures to information, and other related service engagements.

Source: Hong Kong Institute of Certified Public Accountants

Bookkeeping requirements

According to Part 9 of the Hong Kong Companies Ordinance, companies incorporated in Hong Kong must maintain proper books of accounts and satisfy statutory audit requirements annually.

To be more detailed, the bookkeeping requirements are as follows:

  • A company must keep accounting records that comply with:
  • Accounting records that are sufficient to show and explain the company’s transactions; to disclose the company’s financial position and performance with reasonable accuracy; and to enable directors to ensure that the financial statements comply with the Companies Ordinance.
  • In particular, the accounting records must contain:
    • Daily entries of all sums of money received and expended by the company, and the matters in respect of which the receipt and expenditure takes place; and,
    • The assets and liabilities of the company.
  • Where to keep the accounting records:
  • A company’s accounting records must be kept at its registered office or any other place that the directors think fit and must always be open to inspection by the directors without charge; and,
  • If a company’s accounting records are kept outside Hong Kong, the accounts and returns must be sent to a place within Hong Kong. Those accounts and returns must disclose with reasonable accuracy the financial position of the business in question at intervals of not more than six months.
  • How long accounting records are to be preserved:
  • The company must preserve the records for seven years after the end of the financial year in which the last entry was made.
  • Penalties for not complying with the bookkeeping requirements:
  • A company director who fails to take all reasonable steps to secure compliance with the bookkeeping requirements commits an offense and is liable to a fine of HK$300,000 (US$38,370).

Financial reporting requirements

Statutory reports are required annually for companies incorporated in Hong Kong. The reports must contain audited financial statements for the current year, with corresponding amounts for the preceding year, including a balance sheet, profit and loss account, and a cash flow statement. Audited financial statements must be prepared and signed off by a certified public accountant on behalf of a business or non-profit organization to provide financial accountability and accuracy to stakeholders and people with a vested interest in the company.

If a company is incorporated outside but has a place of business in Hong Kong, they should register as a foreign company with the Registry. If required to publish their financial statements under the laws or regulations of their incorporated place, the foreign company should file its financial statements in the annual return to the Registry.

Foreign companies whose securities are publicly traded in the Hong Kong Stock Exchange may prepare financial statements in accordance with either the HKFRS or the IFRS or under certain limited conditions of other reporting frameworks, such as the China Accounting Standards for Business Enterprises (ASBE) and Generally Accepted Accounting Principles in the United States of America (US GAAP).

To prepare financial statements, certain documents might be required according to the instructions by the Inland Revenue Department. These are as follows:

Documents to be Maintained for Financial Statements by Type of Transaction


Record to be maintained


Sales invoice

Goods return note

Receipt slip

Daily receipt record


Purchases invoice

Petty cash voucher

Payment slip

Check stub


General expenses

Expenses invoice

Payment receipt

Check stub

Salary record

Bank transaction

Bank statements

Bank paid-in slip and related receipt details

Check stub and copy

Tangible assets

Purchase and sale agreement

Invoice and receipt

Check stub and copy


Purchase and sale agreement

Invoice and receipt

Check stub and copy

Inventory list (including quantity and unit cost of every item)

Obsolete or slowing-moving inventory


Security ask/bid confirmation slip

Purchase and sale agreement

Capital inspection report (apply for PRC investment)

Note: Section 51C of the Inland Revenue Ordinance provides a more specific list of the records to be kept.

Auditing process

Auditors must be certified public accountants registered with HKICPA. The audit involves planning, testing, evaluating internal controls, analyzing results, and reporting.

Steps in the Audit Process

  • Planning
    • Understand the company's business and risks.
    • Formulate an audit plan with scope, objectives, and procedures.
  • Testing
    • Obtain and evaluate audit evidence.
    • Test internal controls.
    • Verify the accuracy and completeness of financial information.
    • Conduct analytical procedures.
  • Internal Controls Evaluation
    • Assess the effectiveness of internal controls.
    • Test design and implementation.
    • Evaluate operating effectiveness.
  • Analysis and Opinion
    • Analyze audit results.
    • Issue an opinion on financial statements:
    • Unqualified (reliable).
    • Qualified (significant errors found).
    • Adverse (material misrepresentations).
  • Reporting
    • Report internal control deficiencies.
    • Help improve internal controls.

Additional Steps

  • Management prepares financial statements and supporting documents.
  • Auditors review company activities and industry factors.
  • Identify uncertainties or errors in significant transactions.
  • Estimate the steps taken to ensure accuracy.
  • Create audit reports and opinions.
  • Directors sign the audit report.
  • Auditors prepare tax computations and submit documents to the government.
  • IRD reviews audit reports and financial statements and sends tax schedules (if applicable).

The audit process requires time and effort. Prepare the required financial statements and documents to save time.

What is an audit report?

An audit report is a document issued by an auditor after their examination of a company's financial records. It serves to communicate the auditor's findings and opinion regarding the accuracy and reliability of the financial statements. The primary purpose of the audit report is to assure stakeholders, such as shareholders, investors, and creditors, about the financial health and transparency of the audited entity.

There are two main types of audit reports:

  • Unqualified Report (Clean Report): An unqualified audit report is issued when the auditor concludes that the financial statements are free from material misstatements. In other words, the auditor has not identified any significant errors or irregularities that would impact the overall fairness and accuracy of the financial statements. An unqualified report is considered favorable and indicates that the financial statements provide a true and fair view of the company's financial position.
  • Qualified Report: A qualified audit report is issued when the auditor has identified certain issues or limitations in the financial statements. While the auditor believes the financial statements are generally accurate, there may be specific areas or transactions where material misstatements exist. The auditor will detail these concerns in the report, explaining the nature and extent of the issues that led to the qualification. A qualified report indicates that users of the financial statements should exercise caution and pay special attention to the qualified areas.

The audit report is critical for stakeholders as it provides an independent assessment of the company's financial statements and helps them make informed decisions about the entity's financial health and performance.                        

The IRD mandates the inclusion of a third-party audit review of a company's accounts and financial statements in Hong Kong to prevent any inaccuracies or fraudulent audit reviews.

Renewal of Business Registration Certificate

A local private limited company needs to renew the business registration one month before its expiry. The renewal can be done annually or once every three years, depending on whether the certificate is valid for one year or three years. The Business Registration Office of the Inland Revenue Department will send a renewal demand note to registered businesses approximately in the middle of the month preceding the commencement month of the renewal Business Registration Certificate.

Holding an annual general meeting

Every company incorporated in Hong Kong must hold an annual general meeting (AGM) once per year. The AGM should be held within six months of their financial year-end, or within 18 months from the date of incorporation for newly registered businesses. Shareholders must receive at least 21 days’ notice before the AGM. Under the amended Companies Ordinance (Cap.622), companies can conduct AGMs virtually or in hybrid formats, making compliance with the AGM requirement more flexible and convenient.


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