Hong Kong Company Audit Guide: Who, Cost, 5-Step Process
30-second answer: Every company registered in Hong Kong must be audited every year, whether or not it is operating or has any revenue. The audit report must be signed by a certified public accountant holding a practicing certificate from HKICPA. Fees vary by company size and transaction volume; for small companies, roughly HKD 3,000–8,000 (about NTD 12,000–32,000). The audit is a statutory obligation under section 122 of the Companies Ordinance — failing to file is unlawful.
An Audit Is a Statutory Obligation, Not an Option
Under the Companies Ordinance (Cap. 622), every limited company incorporated in Hong Kong must appoint a qualified auditor each year to audit its financial statements and lay the audit report before its annual general meeting of shareholders. There is no exemption from this obligation.
Three common misconceptions:
- “No revenue means no audit.” — Wrong. A company with zero revenue still has to submit an audit report; it may only apply for a simplified version (dormant filings have separate conditions — see the FAQ).
- “Filing the NAR1 counts as an audit.” — Wrong. The NAR1 (annual return) is an administrative filing with the Companies Registry; the audit report is a financial filing with the Inland Revenue Department (IRD). They are independent of each other.
- “Micro companies can skip the audit.” — Wrong. Unlike some jurisdictions, Hong Kong has no size-based audit exemption.
The consequences of not submitting the audit report on time: the IRD may issue a court summons, the company’s directors may face fines, and in serious cases criminal liability may follow. For more on corporate compliance obligations, see Hong Kong Company Tax Filing: An Introduction.
Who Is Qualified to Sign an Audit Report?
An audit report must be signed by a practicing CPA registered with the Hong Kong Institute of Certified Public Accountants (HKICPA). An HKICPA member who does not hold a practicing certificate cannot sign a statutory audit report.
This is a crucial distinction: your bookkeeper, your company secretary, or an accountant without HKICPA qualifications may help you organize your books, but the person who ultimately signs the audit report must be an HKICPA practicing CPA. The audit report lists the auditor’s HKICPA number, which can be verified by the public.
The Five-Step Audit Process
Step 1: Appoint the auditor. The board of directors passes a resolution to appoint the auditor and files the appointment with the Companies Registry and the IRD. The first appointment must be completed within 18 months of incorporation.
Step 2: Organize the books and supporting documents. The company must provide complete accounting records, including bank statements, receipts, invoices, contracts, and payroll records. The auditor first assesses the completeness of the books and requests additional documents if anything is missing.
Step 3: On-site audit procedures. The auditor carries out the audit fieldwork: sampling and checking transaction vouchers, sending bank confirmation letters to verify balances, inspecting inventory (if applicable), and testing internal controls. For small companies, this is usually completed within 1–2 weeks.
Step 4: Issue the audit report. Based on the audit results, the auditor expresses an opinion: an unqualified (clean) opinion, a qualified opinion, or a disclaimer of opinion. Opening a bank account, applying for a loan, or applying for a visa usually requires an audit report with a clean opinion.
Step 5: File the tax return. The audit report is submitted to the IRD together with the profits tax return (BIR51/BIR52). Note: the IRD does not accept a tax return without an accompanying audit report. The full Hong Kong Company Annual Compliance Checklist covers the parallel timelines for the audit and the NAR1.
Document Checklist for the Audit
| Category | Specific documents |
|---|---|
| Company documents | Certificate of Incorporation, BR, NAR1, articles of association |
| Financial records | Bank statements (full year), general ledger, subsidiary ledgers |
| Transaction vouchers | Sales invoices, purchase orders, receipts, contracts |
| Payroll records | Payroll register, MPF contribution records, employment contracts |
| Asset records | Fixed asset register, depreciation schedule |
| Others | Related-party transaction details, shareholder current-account records |
Audit Fee Reference Table (Hong Kong Market Rates)
| Company type | Annual turnover (HKD) | Audit fee range (HKD) | Approx. NTD |
|---|---|---|---|
| Dormant company | 0 | 3,000–5,000 | 12,000–20,000 |
| Small (few transactions) | < 2 million | 5,000–8,000 | 20,000–32,000 |
| Medium | 2–10 million | 8,000–15,000 | 32,000–60,000 |
| Medium-large | 10–50 million | 15,000–30,000 | 60,000–120,000 |
| Large | > 50 million | from 30,000 | from 120,000 |
Fees vary with the number of transactions, industry complexity, and the completeness of the books. The above are market-rate ranges, not fixed quotes.
Audit vs. NAR1: Two Obligations Often Confused
| Item | Audit report | NAR1 annual return |
|---|---|---|
| Legal basis | Section 122 of the Companies Ordinance | Section 662 of the Companies Ordinance |
| Filed with | Inland Revenue Department (IRD) | Companies Registry (CR) |
| Contents | Financial statements + auditor’s opinion | Updates to basic company information |
| Signatory | HKICPA practicing CPA | Director / company secretary |
| Penalty for late filing | Court summons, criminal liability | Daily accumulating fines, up to HKD 50,000 |
| Can you handle it yourself? | No — an auditor must be appointed | Yes, you can file it yourself |
Both must be handled on time; neither is optional. More information on the duties of a Hong Kong company secretary covers the details of filing the NAR1.
Audit Timeline
Taking 31 March as the financial year-end as an example:
- 3–4 months after year-end: organize the books and appoint the auditor.
- 5–7 months after year-end: the auditor starts fieldwork and completes the audit procedures.
- 8–9 months after year-end: receive the audit report and submit it to the IRD together with the tax return.
- Within 9 months after year-end: the annual general meeting (AGM) must be held and the audit report laid before it.
The IRD generally allows 1–3 months for filing after issuing the tax return; the exact deadline is the one printed on the return.
FAQ
Q1: Are zero-revenue companies really exempt from audits?
No. A company with zero revenue still requires an audit, but the auditor will issue a “no opinion” or “disclaimer of opinion” report. If the company also meets the “dormant” conditions (no accounting transactions at all), it may apply to the Companies Registry for dormant status to be exempted from the audit, but this requires a formal application — it is not automatic.
Q2: What is a dormant company, and how is it different from zero revenue?
A dormant company is one that has had no “accounting transactions” whatsoever. The difference lies in the definition of “accounting transaction”: even paying a single company secretary fee counts as a transaction, and the company is no longer dormant. A company with zero revenue but with expense outflows (such as secretary fees or registered-office fees) does not meet the dormant conditions and must be audited.
Q3: Can a “zero filing” replace an audit?
No. “Zero filing” is a misleading term used by some bookkeeping firms. The Hong Kong IRD does not accept a zero filing that has not been audited. Any claim that a “zero filing requires no audit” has no basis in law.
Q4: What is a “summary report,” and can I request one?
The “summary report” (summary financial statements) is a simplified format permitted under the Companies Ordinance, but the prerequisite is that the company has first completed a full audit and obtained the consent of all shareholders. A summary report cannot replace the audit itself.
Q5: How are audit fees estimated, and are large gaps between auditor quotes normal?
Fees mainly depend on: the number of transactions per year (not the amounts involved), industry characteristics (trading vs. financial services vs. holding company), and the completeness of the books. Large gaps between quotes usually arise from different estimates of transaction volume, different allocations of responsibility for organizing the books (the company prepares them itself vs. the auditor prepares them on its behalf), and different depths of audit. Recommendation: get the books into an auditable state before requesting quotes — the quotes will then be more accurate.
Q6: What exactly is the difference between the audit and the NAR1, and can I file just one?
No. The audit report goes to the Inland Revenue Department (IRD), while the NAR1 goes to the Companies Registry (CR); they are independent and cannot substitute for each other. The most common compliance mistake is filing the NAR1 and assuming the audit obligation is fulfilled.
Coordinating Your Compliance Rhythm
A Hong Kong company’s audit must be done every year — it is not a one-off. Line up the three milestones carefully: financial year-end → audit completion date → tax filing deadline. A delay at any point can result in fines.
The content of this article is general information only and does not constitute legal or tax advice. For your specific situation, please consult an HKICPA practicing CPA or a practicing solicitor in Hong Kong.