The answer first
Only a practising certified public accountant (or a CPA firm or corporate practice) in Hong Kong can audit a Hong Kong company's financial statements and sign the auditor's report. The auditor must be independent of the company. Choosing the right auditor affects not just cost, but how smoothly your year end, tax return and bank reviews go.
The directors may appoint the first auditor; afterwards the members appoint or reappoint the auditor each year. Changing auditor requires formal steps, including the outgoing auditor's statement of circumstances.
At a glance
- Who can audit
- A practising CPA, CPA firm or corporate practice in Hong Kong
- Independence
- Your bookkeeper or company secretary cannot audit work they prepared
- First auditor
- Appointed by the directors
- Afterwards
- Appointed or reappointed by members each year
What only a practising CPA can do
- Sign the auditor's report on a Hong Kong company's financial statements.
- Sign certain other reports required by law or regulators, for example for some licensed businesses or funding schemes.
Bookkeeping, preparation of financial statements, tax returns and company secretarial work do not require a practising certificate, although they require competence.
What to look for
| Factor | Questions to ask |
|---|---|
| Experience | Do they audit businesses of your size and sector? |
| Independence | Are they independent of the people who prepare your accounts? |
| Timetable | Can they meet your AGM and tax deadlines? |
| Communication | Who is the engagement partner, and how will queries be handled? |
| Fees | Is the fee fixed or time-based? What is excluded? |
| Group needs | Can they coordinate with auditors of overseas group companies? |
Key takeawayThe cheapest audit quote is rarely the cheapest outcome if it leads to delays, qualified opinions or bank questions. Compare on scope and timetable as well as price.
Appointing and changing auditors
| Situation | Procedure |
|---|---|
| First auditor | Appointed by the directors before the first period ends |
| Annual reappointment | By members at the AGM or by written resolution |
| Resignation | Auditor gives notice with a statement of any circumstances members or creditors should know |
| Removal or replacement | Members' resolution with the notice and procedures required by the Companies Ordinance |
Preparing for your first audit
| When | Action |
|---|---|
| Before year end | Agree scope, fee and timetable with the auditor |
| Month 1 after year end | Close the books; reconcile banks, receivables and payables |
| Month 2 | Provide draft accounts and schedules; auditor fieldwork |
| Month 3 | Answer queries; finalise adjustments |
| Before the deadline | Directors approve and sign; auditor signs the report |
- Keep the company's statutory registers and minutes available for the auditor.
- Prepare a list of related parties and related-party transactions.
- Obtain bank confirmations early; they can take weeks.
Self-check: where do you stand?
| Question | If the answer is no |
|---|---|
| Is your auditor a practising CPA independent of your bookkeeper? | Appoint an independent auditor |
| Is the auditor reappointed each year? | Include it in annual resolutions |
| Does the audit timetable meet your deadlines? | Agree dates at the start of the year |
| Are your books audit-ready at year end? | Move to monthly bookkeeping |
| Do you understand what the fee includes? | Ask for a written scope |
How DBMS Global can help
- Introducing you to independent Hong Kong CPA firms suited to your business.
- Preparing audit-ready accounts and schedules.
- Resolutions and filings for appointment and change of auditor.
In summary
- Only a practising CPA can sign the audit report.
- Choose on independence, timetable and scope, not only price.
- Follow the formal steps when changing auditor.
Official references
- Companies Ordinance (Cap. 622), Part 9: auditors
- Hong Kong Institute of Certified Public Accountants, www.hkicpa.org.hk
- Accounting and Financial Reporting Council, www.afrc.org.hk