What does the audit report contain? What are the procedures for Hong Kong companies to conduct audits?

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Many small and medium-sized enterprises need to audit every year, and they will find certified public accountants for audit work in Hong Kong. Enterprises only need to provide complete accounting information and company documents, and they can cooperate with accountants to complete the entire auditing process and issue audit reports within two weeks at the earliest. What exactly is an audit report? This article will introduce you to the actual content and process of an audit report.

What is the difference between an audit report and a financial report?

A financial report written by a financial analyst can reflect the company’s financial status within a certain period (usually in Hong Kong in terms of years), as well as periodic operating results, with written materials such as a balance sheet, income statement, and cash flow statement attached. Shows equity movements and financial performance.

In financial reporting, some regional “accounting standards” specifically regulate the content of the report, and the information disclosure in the report must comply with this independent standard, so that stakeholders can clearly understand the company’s status without being misled.

As for the audit report, it can generally only be issued by a certified public accountant (certified accountant) recognized by the Hong Kong Institute of Certified Public Accountants. Similarly, the certified public accountant must perform the task of completing the audit work in accordance with the requirements of the auditing standards and in accordance with the contract, and publish it in a written document containing an “audit opinion”.

It is worth mentioning that the audit report is legally binding through independent analysis and verification of the financial information of the company to ensure its authenticity and fairness. Audit reports are required by both private companies and government agencies.

What does the audit report include?

As far as Hong Kong is concerned, the audit report of an enterprise not only contains the most familiar “auditor/accountant opinion”, but also contains a lot of content descriptions, usually including:

  1.   Basic information of the audited enterprise (such as company name, audited financial year, etc.);
  2.   Balance sheet (reflecting the company’s actual assets, borrowings, solvency, etc.);
  3. Income statement (reflecting the company’s profit for the fiscal year, which is the basis for tax assessment);
  4.  Tax form (a certified accountant sorts out the accounts, receipts, bank statements and other information and calculates the taxes and fees payable);
  5.  Audit opinion/auditor’s opinion (give opinion on the analysis of business and capital flow, whether it reflects the current situation in a fair way);
  6. Significant uncertainty (depending on the company’s operating conditions);
  7. Duties and responsibilities of directors and management;
  8. Responsibilities of the tax representative/auditor for the audit report;

Only the audit report of a listed company will include the following two elements:

  • The key point of audit matters (the matters considered most important to the audit according to the professional judgment of the audit);

Other information (usually material and false “non-financial information”)

What is the process for an audit report?

Auditing/auditing work in Hong Kong can be roughly divided into the following four stages. The audit process normally takes about two weeks to complete:

1         Organize the required business information:
From the company registration certificate, business registration certificate, articles of association, etc., to bank account monthly statements, contracts, documents and other accounting documents must be properly organized and handed over to certified accountants for follow-up matters.

‘2.      Select the appropriate “Financial Year End Date”:

  1. Audit work needs to be carried out within the appropriate financial year end date, which generally allows more time to file tax returns. The financial year end date of Hong Kong companies is recommended to be “December 31” or “March 31”.
  2. Accounting ensures that the number of records work:
    When the data is complete, accounting records can be performed to generate financial statements, including “balance sheet, income statement, sub-ledger, general ledger, etc.”
  3.    A certified public accountant issues an audit report:

Finally, certified public accountants will conduct auditing work and issue audit reports that comply with Hong Kong standards based on the above financial statements.

The above information is for reference only. If you have any questions about tax declaration and accounting, we welcome your inquiries.

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