Ultimate Guide to Hong Kong Company Audit & Accounts: Requirements, Exemptions, and Compliance (2025/26)
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Ultimate Guide to Hong Kong Company Audit & Accounts: Requirements, Exemptions, and Compliance (2025/26)
Learn the essential Hong Kong company audit and accounts requirements under the Companies Ordinance. Discover if your SME qualifies for simplified reporting and avoid heavy penalties.
Navigating the Hong Kong Companies Ordinance (Cap. 622) can be a daunting task for business owners. While the official Companies Registry (CR) FAQ provides the legal framework, this guide breaks down the complex "Accounts and Audit" requirements into actionable insights to ensure your company remains 100% compliant.
1. Does Every Hong Kong Company Need an Audit?
In short: Yes. Under Part 9 of the Companies Ordinance, every company incorporated in Hong Kong must prepare annual financial statements and have them audited by a Certified Public Accountant (CPA).
The Only Exception: Dormant Status
The only companies exempt from the audit requirement are those that have officially declared "Dormant" status with the Companies Registry. To be considered dormant:
The company must have no relevant accounting transactions during the financial year.
A special resolution must be passed and filed with the CR (Form ND2A).
2. Key Requirements for Financial Statements
The law mandates that directors prepare financial statements for each financial year that give a "true and fair view" of the company’s financial position.
What a Standard Audit Includes:
Statement of Financial Position (Balance Sheet)
Statement of Comprehensive Income (Profit & Loss)
Statement of Cash Flows
Statement of Changes in Equity
Notes to the Accounts (significant accounting policies)
Pro Tip: Your auditor must be a Practicing CPA registered with the Hong Kong Institute of Certified Public Accountants (HKICPA).
3. The "Reporting Exemption": Simplified Accounting for SMEs
While an audit is mandatory, the complexity of the report can be reduced. Hong Kong offers a Reporting Exemption for Small and Medium-sized Enterprises (SMEs), allowing them to follow the SME-Financial Reporting Standard (SME-FRS).
Who Qualifies for Simplified Reporting?
A private company (or group) qualifies automatically if it satisfies at least two of the following:
Total Revenue: Not exceeding HK$100 million.
Total Assets: Not exceeding HK$100 million.
Employees: No more than 100.
Benefits of the Reporting Exemption:
No "True and Fair View" requirement: Financials only need to be prepared on a historical cost basis.
Simplified Directors’ Report: No need to include a detailed business review.
Reduced Disclosures: No requirement to disclose auditor’s remuneration or certain director interests.
4. Important Deadlines & Timelines
Missing deadlines in Hong Kong leads to heavy fines and potential prosecution.
Requirement | Deadline |
First Audit | Within 18 months of incorporation. |
Annual General Meeting (AGM) | Within 9 months after the financial year-end (for private companies). |
Tax Filing (PTR) | Usually within 1 month of the date of issue (extensions available via CPAs). |
Financial Year End | Usually Dec 31 or March 31 (but companies can choose). |
5. How to Prepare for Your Annual Audit
To avoid delays and high audit fees, keep your records organized throughout the year. Your auditor will require:
Bank Statements: For all company accounts.
Sales/Purchase Invoices: Numbered and dated.
Expense Receipts: Including travel, entertainment, and office costs.
Contracts: Rental agreements, employment contracts, and major sales agreements.
Inventory Records: If your business deals with physical goods.
6. Penalties for Non-Compliance
Failure to comply with Part 9 of the Companies Ordinance is a criminal offense.
Fines: Up to HK$300,000 for directors.
Imprisonment: Up to 12 months for willful non-compliance.
Disqualification: Directors may be barred from managing companies.
Conclusion: Stay Ahead of the Compliance Curve
The Hong Kong Companies Ordinance is designed to maintain the city's reputation as a transparent financial hub. While the requirements are strict, the simplified reporting regime makes it manageable for SMEs.
Need help with your HK company audit? Consult with a Bestar registered CPA today to ensure your business remains in good standing with the CR and the Inland Revenue Department (IRD).
Why Partner with Bestar: Hong Kong’s Leading Registered CPA for Audit & Compliance
Ultimate Guide to Hong Kong Company Audit & Accounts: Requirements, Exemptions, and Compliance (2025/26)
Looking for a Hong Kong-registered CPA? Bestar provides expert audit, accounting, and tax compliance services under the HK Companies Ordinance. Ensure your business stays compliant today.
Maintaining a company in Hong Kong requires more than just filing paperwork; it requires a strategic partner who understands the nuances of the Companies Ordinance (Cap. 622). As a premier Hong Kong registered CPA, Bestar provides the professional oversight needed to ensure your financial statements are not only compliant but optimized for tax efficiency.
The Bestar Advantage: Beyond Standard Auditing
While the Companies Registry outlines the rules, Bestar provides the solutions. Navigating statutory audits can be stressful for business owners. By choosing a Bestar registered CPA, you gain:
Precision Compliance: We ensure every "true and fair view" report meets the stringent standards of the HKICPA.
Tax Integration: We don't just audit; we align your financial statements with your Profits Tax Return (PTR) to minimize liabilities legally.
Seamless SME Support: We help you determine if your business qualifies for the Reporting Exemption, potentially saving you thousands in administrative overhead.
Our Core Audit & Accounting Services
As your dedicated Hong Kong registered CPA, Bestar offers a comprehensive suite of services tailored to international and local entrepreneurs:
1. Statutory Audit Services
Under Section 405 of the Companies Ordinance, your financial statements must be audited. Bestar’s auditors provide independent, rigorous examinations that satisfy both the Companies Registry and the Inland Revenue Department (IRD).
2. SME-FRS Simplified Reporting
Many of our clients qualify for simplified reporting. We help you navigate the criteria—such as the HK$100 million revenue threshold—to streamline your annual disclosures.
3. Dormant Company Maintenance
If your HK company is not currently active, Bestar can assist in applying for "Dormant Status," effectively exempting you from the audit requirement and reducing your annual maintenance costs.
The Bestar Audit Roadmap
We’ve refined our process to be as non-intrusive as possible for your daily operations:
Initial Consultation: We review your company structure and financial volume.
Document Collection: We utilize secure digital portals to gather your bank statements, invoices, and contracts.
Drafting & Review: Our CPAs prepare the financial statements and the Directors' Report.
Audit Opinion: We issue a professional audit opinion in accordance with Hong Kong Standards on Auditing (HKSAs)
.
Filing & Tax Submission: We handle the submission to the IRD, ensuring you never miss a deadline.
Don’t Risk Non-Compliance Penalties
The Hong Kong government has increased its scrutiny of corporate governance. Missing an audit deadline can lead to court summons and fines exceeding HK$300,000.
Why take the risk? Consult with Bestar, your trusted Hong Kong registered CPA, to secure your company’s future in Asia’s premier business hub.
Here is a "Frequently Asked Questions" section designed to address the specific pain points, anxieties, and logistical hurdles Bestar’s clients often face.
Frequently Asked Questions (FAQ)
1. My company didn't make any profit this year. Do I still need an audit?
Yes. This is the most common misconception. In Hong Kong, the requirement for an audit is based on activity, not profitability. If your company has had any transactions (including paying bank fees or receiving small commissions), it is considered "active" and must be audited. Only companies that have formally applied for Dormant Status are exempt.
2. I operate an e-commerce business with thousands of small transactions. How do I keep audit costs down?
High transaction volume often leads to high audit fees due to the manual labor involved in verification.
The Bestar Solution: We utilize cloud-accounting integrations (like Xero or QuickBooks) to automate data fetching. By reconciling your accounts monthly rather than annually, we reduce the "fieldwork" time, which directly lowers your audit costs.
3. Can I change my auditor mid-year if I’m unhappy with my current firm?
Yes. You are not "locked in" to your current CPA. However, the process requires a formal "Letter of Resignation" from the outgoing auditor and a "Letter of Professional Enquiry" from the new auditor (Bestar).
Why clients switch to Bestar: Often, it's due to slow response times or "hidden" fees in their previous firm. We handle the entire handover process to ensure no deadlines are missed during the transition.
4. What is a "Certified Tax Computation," and why do I need it?
An audit report confirms your financial position, but the Tax Computation translates those accounting figures into "taxable income" according to IRD rules.
The Pain Point: Many business owners find that their "accounting profit" is much higher than their "taxable profit." At Bestar, our registered CPAs identify deductible expenses and tax incentives that your internal bookkeeper might miss.
5. How long does the audit process actually take?
For a standard SME with organized records, the audit typically takes 4 to 8 weeks.
The Delay Factor: The #1 cause of delays is missing documentation (e.g., missing bank statements or unvouched expenses).
Our Proactive Approach: We provide a "Pre-Audit Checklist" 30 days before your year-end to ensure you have everything ready, preventing the "tax season rush" in April and August.
6. My company is registered in HK but operates entirely offshore. Do I still need an HK audit?
Yes. Regardless of where your physical operations are located, a Hong Kong-incorporated company must follow the Hong Kong Companies Ordinance. However, we can assist you in applying for an Offshore Profits Tax Exemption, which could result in a 0% tax rate on those earnings—but you must have an audited report to support this claim.
Avoid Penalties: Take the Next Step
Don't let compliance become a bottleneck for your business growth. Whether you are facing a first-year audit or looking to switch to a more proactive firm, Bestar is here to help.
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