Does your Hong Kong company need an audit?

The legal requirement

Under the Companies Ordinance (Cap. 622), every Hong Kong-incorporated company must prepare financial statements each year and have them audited by a Hong Kong practising CPA. The audited statements are laid before members and, for corporations, support the profits tax return filed with the IRD. This applies to a two-person trading company just as it applies to a listed group.

Who is exempt

The main exemption is a dormant company: one that has passed a special resolution declaring itself dormant and has no relevant accounting transactions. If your company traded at all during the year, it is not dormant. Companies incorporated outside Hong Kong (operating here as a branch) follow the rules of their home jurisdiction for statutory accounts, though the IRD can still ask for supporting accounts.

What "SME simplified reporting" actually changes

Qualifying small private companies can report under the SME Financial Reporting Framework and Standard (SME-FRF & SME-FRS), a lighter set of accounting standards with fewer disclosures. This makes the financial statements simpler and cheaper to prepare. It does not remove the audit: the simplified statements are still audited.

What your auditor will ask for

An audit goes far faster, and costs less, when the underlying records are complete. Expect to produce:

• A closed general ledger, with a trial balance that actually balances
• Bank statements for every account, reconciled to the ledger
• Sales and purchase invoices, contracts and expense vouchers
• Records of assets, liabilities, and any director or related-party balances

Most audit pain in small companies is not disagreement over accounting treatments. It is missing paperwork and books that were reconstructed at year-end from memory.

General information current as of mid-2026. This is not legal, tax or accounting advice. Confirm the current requirements with the Companies Registry, the IRD or a licensed practitioner.