The Audit Report in Hong Kong: Requirements & Types

If you run a limited company in Hong Kong, you are legally required to prepare audited financial statements each year. At the front of those statements sits the “audit report”, which provides an independent review of your financial records. Not only is it essential for ensuring compliance with local regulations, but it also helps stakeholders, such as investors, assess your company's financial health.

So, what exactly is the audit report and what do you need to know about it? In this guide, we explain how audit reports work for Hong Kong companies, who must obtain one, the different types, how much an audit typically costs, and when you need to prepare it, so you can stay compliant and avoid issues at tax time.

An audit report in Hong Kong is a formal opinion issued by a Certified Public Accountant (CPA) after reviewing a company’s financial statements. The auditor’s opinion states whether the accounts give a true and fair view of the company’s financial position and performance for the financial year.

The word “opinion” is important. An audit does not guarantee that every figure is perfectly accurate. Instead, the auditor performs audit procedures to obtain sufficient audit evidence and then expresses a professional judgement on whether the financial statements are free from material misstatement.

In Hong Kong, company audits are conducted to ensure your company is following Hong Kong Financial Reporting Standards (HKFRS). Once completed and signed, the audit report is attached to the audited financial statements and submitted together with the Profits Tax Return to the IRD.

An audit report is a document prepared by an auditor that provides their opinion on the financial statements of a company.

An audited financial statement, on the other hand, is the actual set of financial documents (like the balance sheet, income statement, and cash flow statement) that have been reviewed and verified by the auditor.

Under the Hong Kong Companies Ordinance, all companies incorporated in Hong Kong must prepare audited financial statements each year, regardless of company size, revenue, reporting exemption status, or whether a Profits Tax Return has been issued by the Inland Revenue Department. 

The only exception is for companies that have officially declared dormant status under section 447 of the Companies Ordinance.

A standard audit report (or the auditor’s opinion letter) sits in front of your audited financial statements. Together, the package covers:

The opening section states the auditor’s opinion on whether the financial statements give a true and fair view in accordance with the applicable accounting framework.

This section explains that the audit was conducted in accordance with auditing standards and confirms the auditor’s independence. It summarises the scope of work performed and the responsibilities of the auditor.

The report outlines the respective responsibilities of management and the auditor. Directors are responsible for preparing the financial statements and maintaining proper accounting records. The auditor is responsible for expressing an independent opinion based on the audit.

Depending on the size and nature of the company, the report may include additional disclosures required under Hong Kong law or auditing standards.

The report concludes with the auditor’s name, firm, signature, and date.

After completing the audit engagement, the auditor expresses one of four possible audit opinions. The type of opinion tells shareholders, banks, and the Inland Revenue Department how reliable the company’s financial statements are.

An unqualified opinion, often called a clean opinion, means the financial statements give a true and fair view in accordance with the applicable accounting standards. No material misstatements were identified during the audit.

For most Hong Kong companies with proper record keeping, this is the expected outcome.

A qualified opinion means that the financial statements are generally accurate, except for a specific issue. The issue is material but not pervasive, meaning it affects only a particular area of the accounts.

Common reasons include incomplete records, insufficient audit evidence for a specific balance, or disagreement over accounting treatment.

An adverse opinion indicates that the financial statements contain material and pervasive misstatements. In this case, the accounts do not present a true and fair view overall.

This is serious and may raise concerns for shareholders, lenders, and regulators.

A disclaimer of opinion is issued when the auditor cannot obtain sufficient appropriate audit evidence to form a conclusion. This usually happens when records are missing or access to information is significantly restricted.

A disclaimer does not confirm that the accounts are wrong, but it signals that the auditor cannot provide assurance.

For most Hong Kong companies, receiving an unqualified opinion means the audit process is complete, and there are no major concerns.

A qualified, adverse, or disclaimer opinion does not automatically result in penalties, but it can have practical consequences. Banks and investors may view the company as higher risk. It may also lead to a closer review of your financial records in future audits.

If serious issues are not resolved and similar opinions are issued repeatedly, it can damage credibility and make financing or business partnerships more difficult. Addressing the underlying accounting or control issues promptly is therefore critical.

To obtain an audit report in Hong Kong, follow these steps:

1. Hire a Certified Public Accountant (CPA): Only a CPA with a valid practising certificate from the Hong Kong Institute of Certified Public Accountants (HKICPA) can conduct an audit. You’ll need to appoint an external CPA or CPA firm to review your financial statements.
   
2. Prepare Your Financial Records: Ensure your financial records are complete and accurate before the audit. The CPA will require this information to assess your company’s financial position.
   
3. Receive the Report: The CPA will review your financial statements. Once the audit is complete, the CPA will issue an audit report, which includes their opinion on the financial statements, any issues, and the scope of their work.

No. A company cannot prepare or sign its own audit report.

In Hong Kong, only a Certified Public Accountant (CPA) holding a valid practising certificate issued by the Hong Kong Institute of Certified Public Accountants (HKICPA) can perform and sign an audit.

To maintain independence, the auditor must not be a director, shareholder, employee, or have any financial interest in the company.

In practice, companies appoint an external CPA firm to conduct the annual audit.

For most small private companies, audit fees typically range from HKD 8,000 to HKD 20,000 per year. Larger or more complex businesses, such as those with multiple subsidiaries, high transaction volumes, or international operations, can expect to pay HKD 30,000 or more.

Note that the total cost of an audit depends on several factors, including:

• The number of transactions and accounts to check
• The complexity of your financial structure
• Whether foreign subsidiaries or intercompany dealings are involved
• The condition and accuracy of your accounting records

Start preparing your company’s audit shortly after the end of your financial year. For most small and medium-sized businesses, the audit process typically takes between 6-12 weeks from the time the financial statements are ready.

Under the Companies Ordinance, private companies are generally expected to prepare audited financial statements within 9 months after their financial year-end. In practice, it is advisable to plan backwards from your Profits Tax Return deadline to avoid last-minute delays.

The Inland Revenue Department usually issues the first Profits Tax Return about 18 months after incorporation and then annually thereafter. When filing your return, you must attach your audited financial statements, including the signed audit report.

Example: Company with 31 December Financial Year-End

• January: Finalise bookkeeping and reconcile accounts
• February: Prepare draft financial statements
• March: Auditor performs audit procedures and gathers audit evidence
• Early April: Audit report is finalised and signed

To avoid a scramble, keep records current during the year, upload requested documents early, and appoint a single point of contact for the auditor.

Audits are a normal part of running a company in Hong Kong, and they don’t have to be complicated. Staying organised and using smart tools can make all the difference.

With a Statrys business account connected to Xero, you can keep your books tidy, simplify reporting, and make audit preparation effortless when tax season arrives.

Moreover, Statrys provides a comprehensive solution by offering both business accounts and accounting services in one place. You can get audit support as part of the package.