Navigating the complexities of auditing and compliance in Hong Kong can be challenging for companies, both local and international. With its status as a major financial center, Hong Kong demands rigorous adherence to statutory requirements and financial reporting standards. At MVG, we understand these challenges and are committed to providing exceptional auditing and assurance services to help your company meet its obligations efficiently and effectively.
MVG’s Professional Auditing Services
MVG’s team of seasoned accountants and audit professionals is dedicated to working closely with your company to ensure all necessary records and information are meticulously gathered and in order. As your trusted partner, we deliver timely, personalized, and professional auditing and assurance services that extend beyond basic statutory compliance. Additionally, we offer non-statutory auditing services, such as company valuations and due diligence reviews, to help identify potential issues or under-performing assets.
Hong Kong Statutory Audit
In Hong Kong, companies are required to submit statutory reports annually. These reports must include audited financial statements for the current year and the previous year, featuring a balance sheet, profit and loss account, and cash flow statement.
Under the Hong Kong Companies Ordinance, all limited companies incorporated in Hong Kong must have their financial statements audited by a qualified accountant holding a practicing certificate from the Hong Kong Institute of Certified Public Accountants (HKICPA). The HKICPA is the sole authority for issuing financial reporting and auditing standards in Hong Kong.
Statutory audit reports involve a thorough examination of a company’s financial reports by an independent party to ensure compliance with the Companies Ordinance and the Inland Revenue Ordinance.
Hong Kong Financial Reporting Standards (HKFRS)
Hong Kong, as a Special Administrative Region of China, follows its own accounting standards, known as the Hong Kong Financial Reporting Standards (HKFRS), which align with the International Financial Reporting Standards (IFRS) as of 2005.
A statutory audit in Hong Kong must be conducted under the HKFRS framework or, for eligible private companies, under the Small and Medium-sized Entity Financial Reporting Framework (SME-FRF) or Small and Medium-sized Entity Financial Reporting Standard (SME-FRS). The HKFRS is generally used by listed companies, while SME-FRF and SME-FRS are suitable for smaller private entities. The Hong Kong Financial Reporting Standard for Private Entities provides an alternative for larger private companies.
Audited Financial Statements
For tax purposes, companies in Hong Kong must submit audited financial statements along with their Profits Tax Return (PTR) to the Inland Revenue Department (IRD). These statements must be prepared and signed by a certified public accountant to ensure financial accuracy and accountability.
Newly incorporated private companies must present their first set of audited financial statements to shareholders at the Annual General Meeting (AGM) within nine months after the financial year-end (six months for existing companies). AGMs should be held at least every 15 months.
For foreign companies, financial statements can be audited according to international standards.
Information Required for Hong Kong Statutory Audit
Annual financial statements including balance sheet, income statement, statement of changes in equity, and cash flow statement
Sales/service agreements, employment contracts, tenancy agreements for the assessed period
Sales invoices, purchase invoices, expense receipts for the assessed period
Bank statements
List of affiliated companies and individuals
Audited financial statements of subsidiary companies
Copies of any special licenses, if applicable
Company registration documents:
Updated Business Registration Certificate
Incorporation Certificate
Articles of Association
Annual Return
Consolidated Financial Statements
A Hong Kong company controlling one or more entities must prepare consolidated financial statements, reflecting the total assets, liabilities, equity, income, expenses, and cash flows of the parent and subsidiary companies.
If the company is owned by an individual, consolidated statements are mandatory. If owned by a body corporate, exemptions apply under certain conditions, such as being a wholly owned subsidiary or meeting notification requirements. Companies not preparing consolidated statements without applicable exemptions will receive a qualified opinion from auditors.
Foreign Companies in Hong Kong
Foreign companies with a place of business in Hong Kong must adhere to the same reporting requirements as local companies. They must register their business with the IRD and submit Profits Tax returns. If financial statements are required by their place of incorporation, they must also file them with the HK Registry.
If financial statements are audited, these should be submitted with the return, even if not legally required by the foreign jurisdiction. Publicly traded foreign companies may follow HKFRS, IFRS, or other approved reporting frameworks.
Record-Keeping Requirements
Under the Inland Revenue Ordinance, all companies, including foreign companies operating in Hong Kong, must maintain records for at least seven years. Records must be kept in English or Chinese and must enable the accurate determination of assessable profits.
For more information or to engage our auditing services, please contact MVG at info@mvgtrust.com.
