You must not overlook auditing and accounting for Hong Kong firms when starting a new company. You should consider auditing and accounting early on in the formation of your firm. You don't want to put it off because any delay might result in extra costs later.
Following the government's adoption of the new Hong Kong Companies Ordinance on March 3, 2014, Hong Kong has established rules for firms to submit a Statutory Audit in compliance with the Hong Kong Financial Reporting Standards.
Audit in Hong Kong
If you intend to do business in Hong Kong, you must first understand accounting, bookkeeping, and auditing standards in Hong Kong to avoid mistakes with your tax documents. The only authorized entity in Hong Kong that registers and certifies accountants is the Hong Kong Institute of Certified Public Accountants.
The Hong Kong Institute of Certified Public Accountants (HKICPA) is the governing body for accounting and auditing regulations in Hong Kong. It is also responsible for the implementation of international standards in statutory audit, assurance, and related services. The Inland Revenue Department submits an annual tax assessment to comply with these accounting and auditing standards (IRD).
A registered and certified public accountant must audit the financial statements of a Hong Kong incorporated firm.
Statutory audits are performed in order to guarantee that the information and documentation provided by a company to the IRD in its financial statements are correct, free of internal bias. The audit of taxes, profits, and financial records is carried out by a third party (a CPA) to ensure that tax regulations are followed in Hong Kong.
In order to prevent any miscalculations or phony audit examinations, the IRD requires third-party audits of corporations' accounts and financial statements in Hong Kong.
Audit report, tax computation hk, and tax filing
When the auditing is completed, and the CPA has received all of the returned signed audit reports and audit paperwork, he or she sends the finished audit report and tax computation hk to IRD.
It is also suggested that you collaborate with auditors in Hong Kong to give the authorities with proper signed audit reports and other required auditor documents containing critical data. Only the actual hard copy of the signed audit report from high-ranking officials will be accepted by the IRD.
After the paperwork are delivered, the IRD office has to examine all of the data. When a company has taxable profits, it provides a tax payable timetable.
The IRD has a waiting period of up to six months before releasing tax file data. When it comes to processing time, this can range from a few weeks to a few months (handled by the IRD). Remember that because of other tax filings, the authorities take longer in April, August, and November to process your return.
The CPA would advise the owners on time to prepare the company papers and statements for the following audit after the first, initial audit of the firm is completed. However, it's better to start preparing these documents sooner rather than later.
Note for businesses that do not want to risk submitting an incomplete or incorrect application: Only one month after receiving the PTR, companies must complete the file, audit report, and tax filings. Keep in mind that this period is insufficient for gathering all necessary papers and performing all necessary audit procedures.
The procedure of a financial audit in Hong Kong
The entire audit procedure is made up of a number of phases, during which the CPA meticulously examines and verifies a variety of data, including financial statements and figures as well as the whole firm. This is essential to guarantee that your company's financial statements are accurate.
The company's management is in charge of preparing financial statements and supporting documentation before submitting the papers to the CPA. Auditors begin reading through the papers after they have been delivered. They also attempt to comprehend the company's operations and consider critical variables that may influence auditing.
- The CPA finds and examines any flaws in the financial statements that may have a significant influence on the company's financial results.
- They examine the company's activities to ensure that financial statements are correct. The entire supporting paperwork is also vetted for accuracy.
- The auditor then gives their assessment of financial reports' accuracy and fairness.
- The next stage is to create an audit report based on their assessment.
- Before returning the audit reports to the auditor, the board of directors must sign off on them along with other essential audit papers.
- Every one of these papers, including the CPA's Profits Tax Return and computated tax form, is sent to the IRD.
A company incorporated in Hong Kong is compelled by local legislation to work with the CPA to guarantee that audit reports contain correct information. The firm must submit signed audit reports as well as auditor credentials. Only the actual hard copy of the audit report signed by the company's directors is acceptable to the IRD.
In the case of any taxable profits, the IRD may take a few weeks or months to analyze the audit results and provide an income tax payment schedule to the firm.
In terms of financial statement preparation, the firm should produce papers and statements for the next financial year after completing its initial audit.
It's best to plan ahead of time because if the firm decides to wait for the PTR, it may be too late. There will only be one month for the firm to submit an audit report and tax in that scenario.
To comply with local accounting standards, a company in Hong Kong must have a profit and loss account, balance sheet, general ledger, and trial balance.
How FastLane can help?
The company offers professional audit services at fair prices through FastLane. Drop us an email if you want to talk about any of the above. We'll clear up any jargon so you can understand and obtain the support you need to complete your first corporate eval with success. You can begin by visiting the Inland Revenue Department's website if you'd like to research an official source.