The audit pack: what Hong Kong companies must prepare for the statutory audit

What Is an Audit Pack for Hong Kong Statutory Audit?

An audit pack is the complete set of documents and schedules a Hong Kong company prepares and delivers to its auditor before the statutory audit begins. The auditor uses this pack to plan the engagement, assess risk, and perform the detailed testing that supports the auditor's report. A well-organised audit pack allows a Hong Kong statutory audit engagement to proceed faster and at a lower fee because the auditor does not have to chase missing information. The pack includes the trial balance, supporting schedules, bank confirmations, and copies of key agreements. Preparing it thoroughly is the single most effective step a company can take to control audit cost and avoid delays.

Hong Kong Audit Preparation Checklist

Before the auditor arrives, confirm that the accounting records are complete and reconciled. The checklist below covers the minimum items every Hong Kong company should have ready.

Also confirm which reporting framework the financial statements follow: full HKFRS, HKFRS for Private Entities, or SME-FRF and SME-FRS for companies that qualify under section 359 of the Companies Ordinance (Cap. 622). The auditor will need to know.

PBC List Hong Kong Audit

The PBC list - prepared-by-client list - is the formal schedule of documents the auditor requests from the company. A standard PBC list for a Hong Kong statutory audit includes the following categories.

Trial Balance and General Ledger

The trial balance is the starting point for every audit. The auditor uses it to understand the company's account structure, identify unusual balances, and select items for testing. The general ledger provides the transaction-level detail behind each trial balance line. Both must be provided in electronic format, preferably in Excel, with the account codes and descriptions that match the chart of accounts used throughout the year.

Bank Confirmations

The auditor will send a standard bank confirmation letter to each bank where the company holds accounts. The company must sign the letter to authorise the bank to release information directly to the auditor. This confirmation covers account balances, overdrafts, loans, and any security arrangements. Provide bank statements for the entire financial year and the period after year-end up to the audit date.

Accounts Receivable Aging

An aged listing of trade receivables as at the year-end date is required. The auditor uses this to assess the adequacy of the provision for doubtful debts and to select balances for direct confirmation with customers. The aging should show each customer, the outstanding amount, and the number of days past due. Have supporting documents such as sales invoices and credit notes available for inspection.

Accounts Payable Aging

An aged listing of trade payables is needed. The auditor reviews this to confirm that liabilities are complete and properly classified. The aging should show each supplier, the outstanding amount, and the age of the balance. Purchase invoices and goods received notes should be filed and accessible.

Fixed Asset Register

A complete fixed asset register is essential. It must list each asset, its cost, the date of acquisition, the depreciation method, the useful life, accumulated depreciation, and the net book value. Show additions and disposals during the year separately. The auditor will test a sample of assets to verify existence and condition. The register must be consistent with the depreciation charge in the profit and loss account.

Inventory Count Records

If the company holds inventory, the auditor will expect to see the results of the year-end physical count. Provide the count sheets, any adjustments made, and the valuation summary. The valuation must be at the lower of cost and net realisable value, in accordance with HKFRS. The auditor may attend the count or perform alternative procedures if the count has already taken place.

Directors' Report and Minutes

The directors' report is a legal requirement under the Companies Ordinance. It must contain the information prescribed by Schedule 5 of the Ordinance, including a fair review of the business, principal risks, and an indication of likely future developments. The auditor reads the directors' report to check for consistency with the financial statements. Minutes of board meetings and members' resolutions are also reviewed to confirm that significant transactions were properly authorised.

Hong Kong Audit Supporting Documents

Beyond the schedules listed above, the auditor will request supporting documents for specific transactions and balances. These include:

• Sales and purchase contracts, especially for large or unusual transactions
• Loan agreements and finance lease contracts
• Correspondence with the Inland Revenue Department, including tax assessments
• Payroll records, including MPF contribution schedules and salary tax returns
• Related party transaction agreements and director loan account statements
• Insurance policies for assets held
• Legal correspondence and any pending litigation details

Organise these documents by balance sheet heading so the auditor can locate them quickly. A well-prepared file reduces enquiry time. It also increases the likelihood of a clean audit opinion.

How the Audit Pack Supports the Auditor's Work

The auditor's objective is to obtain sufficient appropriate audit evidence to support the auditor's report. The audit pack provides the raw material. The trial balance and general ledger allow the auditor to perform analytical procedures - comparing current year figures to prior year and to budget. The aging schedules support the assessment of recoverability of receivables and completeness of payables. The fixed asset register supports verification of depreciation and existence of assets. The bank confirmation provides independent third-party evidence of cash balances.

When the audit pack is complete and accurate, the auditor can rely on the company's records and perform less detailed testing. When the pack is incomplete or contains errors, the auditor must perform more work. That increases the audit fee and extends the timeline. A complete audit pack is in the company's own interest.

Retention of Accounting Records

After the audit is completed, the company must retain its accounting records for seven years, as required by the Companies Ordinance. This includes the audit pack, the supporting documents, and the final audited financial statements. The records may be kept outside Hong Kong, but the company must send to and keep in Hong Kong such accounts and returns as are sufficient to disclose the financial position with reasonable accuracy. The auditor will normally remind the company of this obligation in the engagement letter.

Role of the Practice Unit

The audit must be carried out by a practising certified public accountant registered with the Hong Kong Institute of Certified Public Accountants (HKICPA). Only a registered practice unit may sign a Hong Kong statutory audit report. The practice unit is responsible for planning the audit, assessing going concern, and forming an opinion on whether the financial statements give a true and fair view. The company's directors are responsible for preparing the financial statements and for providing the auditor with all the information and explanations necessary for the audit. A well-prepared audit pack is the most practical way for the directors to fulfil that obligation.