Company Audit Report｜Every company is required to prepare complex accounting documents for tax filing, including an audit report prepared by a third-party auditor to verify the accuracy and reliability of the company’s financial statements. In this article, we’ll discuss the purpose of an audit report, its submission timeline, and the audit process. At the end of the article, we’ve included a reference table for audit fees for limited companies to help business owners plan accordingly.
A financial statement audit is a professional examination of a company’s financial statements. Its objective is to determine whether the financial statements fairly and accurately represent the company’s activities and financial position in accordance with Generally Accepted Accounting Principles (GAAP) issued by the Financial Accounting Standards Board. Specifically, auditors provide opinions on the accuracy of income statements, balance sheets, cash flow statements, and all related disclosures. Financial statement audits must be conducted by external independent auditors in compliance with GAAP.
An Audit Report is a document that certifies the accuracy, fairness, and reliability of a company’s financial statements. Generally, companies are legally required to engage third-party auditors to review financial statements such as balance sheets, cash flow statements, income statements, and equity statements. After completing their analysis, auditors prepare an audit report for the company, confirming whether all financial statements meet the requirements of Hong Kong accounting standards.
Audit reports serve multiple purposes. For example:
- Publicly listed companies can use audited financial reports to help investors assess their financial status and make informed investment decisions.
- Non-governmental organizations or other entities can use audit reports to demonstrate the accuracy of their accounting records and provide transparent updates on their financial status to stakeholders in an independent and impartial manner.
By law, whether you operate as a limited company or an unlimited company (sole proprietorship/partnership), you are required to file a profits tax return if your business generated taxable profits in the previous fiscal year.
Starting from April 1, 2023, small corporations and businesses must submit supporting documents along with their tax returns—this includes audited financial statements—regardless of income levels. As a result, during every tax season, companies required to submit financial reports to the Inland Revenue Department must undergo audits and prepare audit reports for tax filing purposes.
Failing to conduct timely audits or submit tax returns and audit reports on time may result in penalties and legal liabilities for SMEs.
Limited Companies
The Inland Revenue Department (IRD) issues profits tax returns on the first working day of April each year for non-first-time filers. Limited companies have one month to complete their tax forms and prepare supporting documents such as taxable income details and audit reports. Companies must file their returns and submit all relevant documents before the deadline. If filing online, extensions may be granted (details below).
Unlimited Companies
The IRD also sends tax returns to unlimited companies on the first working day of April each year. Depending on their business nature:
- Partnerships must return completed forms within one month along with supporting documents such as financial statements, income statements, and balance sheets. Profits earned by all partners must be clearly stated in the return.
- Sole proprietorships only need to fill out Section 5 of their personal tax return with relevant business details—no separate tax return is required.
New Companies
Newly established limited companies or partnerships typically receive their first tax return within 18 months of incorporation and must file it within three months without extensions.
The IRD generally does not require annual profits tax returns from companies that have not commenced operations, ceased operations without resuming business activities, or have not earned assessable profits. However, if there are potential tax liabilities identified during reviews, taxpayers may still be required to file returns as specified by the IRD.
Companies exempt from submitting audited financial statements with their returns include:
- Dormant companies under the Companies Ordinance (Cap. 622).
- Companies registered in jurisdictions without statutory requirements for audited financial reports.
- Hong Kong branches of foreign companies (supporting documents required).
Under the Inland Revenue Ordinance, failing to file tax returns or submit required documents without reasonable cause may result in fines up to HK$10,000. Late payments may also incur additional surcharges.
The audit process generally involves these steps:
- The company prepares financial statements and supporting documents (e.g., general ledger, expense receipts).
- Registered auditors review business operations and identify factors affecting audits.
- Auditors examine financial records for accuracy and assess their impact on overall reporting.
- Auditors draft an audit report with their opinion (Audit Opinion).
- Company directors sign off on the report and supporting documents.
- Auditors complete tax computation forms and submit all relevant documents to the IRD.
Company Registration Documents: | ✅ Business Registration Certificate ✅ Articles of Association ✅ Certificate of Incorporation ✅ Annual Return ✅ Meeting Minutes |
Financial Documents: | ✅ Audited annual financial reports ✅ Income proof ✅ Bank account statements ✅ Receipts ✅ Invoices & expense records ✅ Contracts (rentals/employees) ✅ Salary details ✅ Profits Tax Return ✅ Previous audited reports |
| Fee Range | Services Included |
|---|---|---|
Sleek | HK$5,280/year | Preparation of audited reports (HK SME-FRS), profits tax computation & filing, post-sale support |
CLG | Varies | Statutory audits & special services like M&A evaluations |
Osome | HK$317–HK$1,550/month | Online platform access for document submission & tracking deadlines |
PLBiz Strategy | Starting from HK$5,500 | Annual company audit (up to 50 ledger entries) |
Under the Companies Ordinance, all companies, regardless of size, are required to submit audited financial statements when filing profits tax returns. However, the lack of professional accounting knowledge, complex regulations, and the risk of errors can make preparing ledger documents a headache for business owners!
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