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Accounting and Auditing

According to the Companies Ordinance and to the Inland Revenue Ordinance all companies registered in Hong Kong are obliged to hold accounting of their activities according to Hong Kong GAAP standards. Accounting reports are presented to the Inland Revenue Department of the fiscal authorities.

According to the requirements of the  Hong Kong GAAP the accounting should reflect:

  • The property of the company as of the current date;
  • All assets and liabilities of the company;
  • All transactions with the capital resources;
  • All transactions with the products (the products should be followed by specifications, invoices, etc.).

According to the Companies Ordinance, together with the requirement to conduct accounting and reporting, the company is also obliged to hold each year auditor’s inspections. The results of inspections are to be presented to the members (shareholders) of the company.

The first General Meeting of the Shareholders for approbation of accounts, reports of directors and auditor’s reports should be held not later than 18 months after company’s incorporation. The company’s accounts should be inspected by the auditor – the holder of license for audit practice in Hong Kong.

Information required for preparation of general audit:

  • records of all banking transactions (bank statements, check books for whole financial period);

  • records of sale and purchase of goods and services (contracts, agreements, sale and purchase invoices, receipts and other documents confirming bank transactions);

  • credits, loans, debt claims data (loan agreements, bearing the following information: duration, terms of repayments, ceiling of credit, interest rate, type of loan security, frequency of tranches provision. Records of promissory notes issued by the company and other liabilities of the company);

  • trade finance records (letter of credits, promissory notes accepted by the company, warranties, guarantees, indemnities and other liabilities undertaken by the company in favor to third parties);

  • company assets records (tangible and intangible, including those outside of Hong Kong).

 Small business companies, whose income during the financial year does not excede 2 000 000 HKD (about  258 000 USD), is exempt from audit. This means that when presenting tax profit declaration to the Inland Revenue Depatment a small business company does not attach the audit report.