Do I need an audit for my Hong Kong company?
Yes. ALL Hong Kong private limited companies must have their accounts audited annually by a Hong Kong-registered CPA (member of HKICPA), regardless of size, revenue, or whether the company is dormant. There is no small company audit exemption in Hong Kong.
Detailed Explanation
## Mandatory Annual Audit for All HK Companies
Every Hong Kong private limited company incorporated under the Companies Ordinance (Cap. 622) must prepare audited financial statements each year. This is a statutory requirement with no size-based exemption.
This is one of the most significant compliance differences between Hong Kong and other common-law jurisdictions:
| Jurisdiction | Small Company Audit Exemption | |---|---| | Hong Kong | No exemption. All private companies must audit. | | UK | Yes. Companies below 2 thresholds (turnover under GBP 10.2M, balance sheet under GBP 5.1M, under 50 employees) qualify for exemption. | | Australia | Yes. Small proprietary companies (below 2 of: AUD 25M revenue, AUD 12.5M assets, 50 employees) are exempt. | | Singapore | Yes. Small companies (below 2 of: SGD 10M revenue, SGD 10M assets, 50 employees) are exempt. |
HK has no equivalent exemption. A brand new company with HKD 0 revenue and 0 transactions technically requires audited financial statements (in practice, a simple 'nil activity' set of accounts costs far less to audit).
## What Must Be Audited
The auditor reviews and signs the annual financial statements, which comprise: - Balance sheet (statement of financial position) as at the year-end date - Profit and loss account (income statement) for the year - Cash flow statement for the year - Notes to the financial statements (accounting policies, related-party transactions, etc.)
The auditor issues an audit report expressing an opinion on whether the financial statements give a true and fair view of the company's financial position.
## Who Can Perform the Audit
The audit must be performed by a Certified Public Accountant (CPA) who holds a Practising Certificate issued by the Hong Kong Institute of Certified Public Accountants (HKICPA).
An overseas CPA or accounting firm not registered in HK cannot perform a valid HK statutory audit. The IRD will not accept financial statements audited by a non-HK-registered auditor.
## The Audit Process
Timeline: - Engage auditor at least 3-4 months before your filing deadline - Provide complete accounting records, bank statements, and invoices - Respond to auditor queries (typical turnaround: 2-6 weeks) - Review draft accounts and sign off - Auditor issues signed audit report - File with IRD as part of BIR52
Records you must provide to the auditor: - Bank statements for all accounts for the full year - All sales invoices and receipts - All purchase invoices and expense receipts - Cash book or general ledger from accounting software - Loan agreements and shareholder loan schedules - Fixed asset additions and disposals - Payroll records and MPF statements
## Typical Audit Fees
| Company type | Approximate annual audit fee | |---|---| | Dormant / nil activity | HKD 3,000 - HKD 5,000 | | Small company (under HKD 1M revenue) | HKD 6,000 - HKD 12,000 | | Medium company (HKD 1M - HKD 10M revenue) | HKD 12,000 - HKD 30,000 | | Larger company (HKD 10M+ revenue) | HKD 30,000+ |
Fees vary significantly by auditor, complexity, and whether accounting records are well-organised. A company that presents complete, reconciled records to the auditor will pay less than one that requires extensive bookkeeping clean-up.
## Why Audit Is Mandatory in HK
The mandatory audit requirement reflects Hong Kong's commitment to financial transparency and investor protection. Because there is no annual financial statement filing with the CR (unlike UK Companies House), the IRD receives audited accounts as part of the tax filing. The audit provides the IRD with assurance that the Profits Tax return is based on properly prepared financial statements.
Source: ird.gov.hk
Real-World Examples
Dormant company still requires audit
A founder incorporates a HK company in anticipation of a project that is then delayed. The company has no transactions for 18 months. It still requires annual audited financial statements. In practice, a 'nil activity' audit is simple and inexpensive (HKD 3,000-5,000) but cannot be skipped.
Overseas accountant rejected by IRD
A company files its BIR52 with financial statements signed by a UK-qualified chartered accountant who is not a HKICPA practising certificate holder. The IRD rejects the filing. The company must engage a HK-registered auditor to re-audit and refile, incurring double costs and a late filing penalty.
Well-organised records reduce audit costs
Company A provides its auditor with Xero-exported trial balance, reconciled bank statements, and a complete invoice folder. Audit completes in 3 weeks at HKD 8,000. Company B provides a shoebox of receipts and an unreconciled spreadsheet. Audit takes 8 weeks, requires extensive queries, and costs HKD 22,000.
Common Mistakes to Avoid
- Engaging an overseas accountant who is not a HKICPA practising certificate holder (the IRD will reject the accounts)
- Leaving the audit engagement until 1 month before the filing deadline (auditors are heavily booked April-August; engage in January-February for April/December year-ends)
- Assuming a dormant company with no revenue does not need an audit (it does)
- Not maintaining proper accounting records throughout the year, leading to higher audit fees and delays
Frequently Asked Questions
Is there a small company audit exemption in Hong Kong?
No. Unlike the UK, Australia, and Singapore, Hong Kong has no size-based audit exemption. All private limited companies must audit annually regardless of size, turnover, or activity level.
Does a dormant company need to be audited?
Yes. Even a dormant HK company with no transactions is required to have audited financial statements. A dormant company audit is inexpensive (HKD 3,000-5,000) but cannot be skipped.
Can I use an overseas accountant to audit my HK company?
No. The auditor must be a CPA holding a Practising Certificate issued by the Hong Kong Institute of Certified Public Accountants (HKICPA). Overseas qualifications alone are insufficient.
When must the audit be completed?
There is no specific statutory deadline for audit completion, but the audited accounts must be filed with the IRD as part of the annual Profits Tax Return (BIR52). The BIR52 deadline is typically August or November depending on year-end — so the audit must complete before then.
Are audited accounts filed at the Companies Registry?
No. Unlike the UK, HK companies do not file accounts with the Companies Registry. Audited accounts are submitted to the IRD as an attachment to the annual Profits Tax Return (BIR52). They are not publicly available.
Practical Tips
- Engage your auditor in January or February for a March or April year-end. The April-August period is peak season for HK auditors; late engagement means delayed accounts and possible late-filing penalties.
- Use cloud accounting software (Xero, QuickBooks, AccountsOS) to maintain a running trial balance throughout the year. Handing a CPA a reconciled set of accounts rather than a box of receipts typically halves the audit fee.
- Ask the audit firm whether they can also prepare the Profits Tax computation and file the BIR52. Most HK CPA firms do this as a bundled service.
- Keep HK accounting records in HKD even if the company's functional currency is another currency. The IRD prefers HKD-denominated accounts, and foreign currency translation adds audit complexity.
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