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Audit Reports: 4 types of audit opinions & more things to know!

 

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【Entrepreneurs Must-Read】Hong Kong Profits Tax Guide 2024

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Table of contents

  1. What is an Audit Report?
  2. Why do an Audit Report?
  3. When to do an Audit Report?
  4. When to submit the Audit Report?
  5. What methods may exempt the company from auditing?
  6. What are the consequences of not completing the Audit Report on time?
  7. The Audit process
  8. Conclusion

 

Hong Kong companies need to hire a registered accountant annually to audit the company's financial statements and issue an audit report to certify the accuracy and fairness of the financial statements. This article will help you understand the audit opinions in the audit report, their role, the completion date, the consequences of late submission, the audit process, etc., to help you easily handle the audit.

Businessman key research and auditing income statement data from excel spreadsheet.

 

What is an Audit Report?

The Audit Report is a report on the audit of the company's financial statements. Companies need to hire a third-party registered accountant to assess whether the financial statements are accurate and fair according to the relevant audit standards, and to express the corresponding audit opinion.

4 types of audit opinions:

  • "Unqualified opinion": Satisfied with the quality of the company's financial statements, no material errors.
  • "Qualified opinion": Doubts about the reliability of certain activities or transactions, suggesting a negative opinion on the company's financial position.
  • "Adverse opinion": Believes the financial statements contain material errors and there is a possibility of fraud.
  • "Disclaimer of opinion": Believes that it is impossible to express a clear opinion, which will give a negative impression of the company.

 

Why do an Audit Report?

Hong Kong law requires that general companies complete the audit procedure for the company's financial statements before the annual taxation deadline, and submit the audit report together with the Profits Tax Return to the Inland Revenue Department. In addition, the audited financial statements can help investors assess the company's situation and increase their trust.

Non-profit organizations, schools and other organizations that frequently receive funding from various sources also need to prepare audit reports on time, so that the funding organizations and the public know the use of the funds, maintain trust and continued funding.

 

When to do an Audit Report?

Unless applying to become a dormant company, general Hong Kong companies need to complete the audit before the financial year end and submit the audit report when filing the Profits Tax Return with the Inland Revenue Department.

  1. New companies: The first Profits Tax Return is usually issued about 18 months after the notification of commencement or incorporation.
  2. General companies: The Profits Tax Return is usually issued on the first working day of April each year.

 

When to submit the Audit Report?

The audit report will be submitted to the Inland Revenue Department together with the Profits Tax Return before the tax filing deadline, usually within one month of receiving the tax return. Generally, the Profits Tax Return is issued on the first working day of April each year, and companies can also apply for an extension to file the tax return, for details on the extension, please refer to the article: 【Entrepreneurs Must-Read】Hong Kong Profits Tax Guide 2024

 

What methods may exempt the company from auditing?

  • Apply to become a dormant company
  • The company's place of registration does not require the company's financial statements to be audited (such as the British Virgin Islands, BVI)

 

What are the consequences of not completing the Audit Report on time?

Late filing of the Profits Tax Return can be punished with a maximum fine of HK$10,000, and a fine of up to 3 times the amount of tax underpaid can be imposed, and the court can also order the submission of the tax return within a specified time.

 

The Audit process

  1. The company prepares the financial statements and supporting documents for the third-party registered accountant to handle.
  2. The auditor understands the company's operations and confirms the factors that may affect the audit.
  3. The auditor checks the accuracy of the financial statements and supporting documents, and assesses any errors that may have a significant impact.
  4. The auditor issues an audit report and audit opinion, reflecting the accuracy of the company's annual financial statements.
  5. The company's directors sign the audit report and supporting documents.
  6. The auditor fills out the tax return and sends the required documents to the Inland Revenue Department.

teamwork as diverse members of the team do account and auditing.

 

Conclusion

The Audit Report is a critical document for the company, and seeking the support of professional accountants can greatly improve the efficiency of audit and tax filing, and even bring more benefits.

OneStart provides "Accounting, Auditing and Taxation One-Stop Service”, with a professional accounting team with years of experience, trusted by customers, making the entire accounting, audit and tax filing experience smooth and efficient. We can also act as a tax representative to provide professional opinions. To know more about the plan details, please call 3575 6888, or WhatsApp our OneStart business consultant.

 

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