Process and checklist for changing your accountant in Hong Kong

Changing Your Accountant in Hong Kong Process and Checklist

Hong Kong companies change accountants for many reasons, from shifting business needs to a fee review or a requirement for industry-specific expertise. The transition involves formal steps with the outgoing firm, the incoming firm, and the Companies Registry. Practically, you must notify the outgoing accountant, obtain the audit pack and prior-year working papers, and engage a new HKICPA practice unit. Run these three tracks in parallel where possible.

Hong Kong Switch Accountant: When and Why

The most common trigger is the end of an audit engagement. An auditor is appointed at the annual general meeting or by written resolution and holds office until the next AGM. To change before the term expires, a director must propose a resolution to remove the auditor and appoint a replacement. The outgoing auditor has a statutory right to make written representations and to attend the meeting. Do not treat this as a formality.

A switch can also happen if the outgoing practice unit ceases to hold a practising certificate, or if the company’s structure changes and it now needs a firm with group audit capability. Regardless of the trigger, the company must follow the same notification and documentation steps.

Hong Kong Change Auditor Process: The Formal Steps

The Companies Ordinance (Cap. 622) sets out the legal procedure.

1. Board resolution - The directors resolve to recommend a change of auditor to the members.
2. Notice to the outgoing auditor - The company must give written notice of the proposed resolution. The auditor may make representations.
3. Members’ resolution - The members pass an ordinary resolution to remove the existing auditor and appoint a new one.
4. Notification to the Companies Registry - Within 15 days of the resolution, file Form ND2A (Notice of Change of Auditor) with the Companies Registry. The 15-day clock starts on the date the resolution is passed.
5. Engagement letter with the new auditor - The incoming practice unit issues a new engagement letter for the company to sign and return.

If the change happens at the AGM, the resolution is part of ordinary business and no separate Form ND2A is required for the appointment itself. The annual return (Form NAR1) records the current auditor. If the change occurs between AGMs, Form ND2A is mandatory. Mark the deadline in your calendar the day the resolution passes.

Hong Kong Accountant Transition Checklist: Documents to Exchange

A smooth transition depends on the outgoing accountant handing over a complete set of working papers and supporting records.

• Audit pack - The schedules and analysis prepared by the company for the most recent audit.
• Prior-year financial statements - Signed audited accounts and the auditor’s report.
• Directors’ report - The most recent directors’ report.
• Management accounts - Internal monthly or quarterly reports, if any.
• Bookkeeping records - Trial balances, general ledger, and detailed transaction listings.
• Tax correspondence - Profits tax returns (BIR51) and correspondence with the Inland Revenue Department.
• Engagement letter - A copy of the letter from the outgoing firm, which sets out the scope of the previous engagement.

The outgoing accountant is professionally obliged to cooperate. The HKICPA’s Code of Ethics requires a practice unit to respond promptly to a request from a successor auditor. Request the transfer in writing and allow a reasonable period. Two to four weeks is standard. Send the request before you sign the new engagement letter.

Auditor’s Report Implications: Modified Opinion and Going Concern

If the outgoing auditor issued a report with a modified opinion, a qualified opinion, an adverse opinion, or a disclaimer of opinion, the new auditor must consider whether the matters that gave rise to the modification have been resolved. The same applies if the report included a material uncertainty related to going concern. These are not footnotes. They shape the incoming auditor’s entire risk assessment.

The incoming auditor will review the prior-year audit file and assess whether the basis of the modified opinion still exists. If it does, the new auditor’s report will carry the same or a similar modification. If the company has taken corrective action, for example, it has obtained evidence to support a previously uncertain balance, the new auditor may be able to issue an unmodified opinion. Prepare a written explanation of the corrective steps taken. Give it to the incoming auditor before fieldwork begins.

Directors should be prepared to explain any changes in the company’s financial position or accounting policies that affect the auditor’s view. The new auditor will also review the accounting records for the period since the last audit to ensure they are complete and accurate.

Seven-Year Record Retention Obligation

The Companies Ordinance requires a company to keep its accounting records for seven years from the date of the transaction or the end of the financial year to which they relate, whichever is later. This obligation does not change when the accountant changes. The outgoing accountant may retain copies of working papers. The company remains responsible for the original records. That responsibility is yours, not the outgoing firm’s.

When the new accountant takes over, confirm the outgoing firm has returned all original documents. This includes invoices, contracts, bank statements, and bookkeeping records. If the outgoing accountant holds any records that belong to the company, demand their return in writing. Do it on the first day of the handover.

Engaging a New HKICPA Practice Unit

Only a practice unit registered with the HKICPA may sign a Hong Kong statutory audit report. The practice unit must hold a practising certificate and be led by a certified public accountant who is a member of the HKICPA. When selecting a new firm:

• Confirm the firm’s registration status on the HKICPA website.
• Review the firm’s experience in the company’s industry.
• Agree the audit fee and the scope of work in the engagement letter.
• Ensure the firm has capacity to complete the audit within the statutory deadline. For a private company, that is nine months after the financial year end. For a public company, six months.

The engagement letter should specify the financial reporting framework the company will use. The options are full HKFRS, HKFRS for Private Entities, or SME-FRF and SME-FRS for reporting-exempt companies under section 359 of the Companies Ordinance. Choose the framework before you approach firms. It determines the fee.

Updating the Companies Registry

If the change of auditor occurs between annual returns, file Form ND2A with the Companies Registry within 15 days. The form requires the name and address of the new auditor and the date of appointment. Failure to file means the company and every responsible officer commit an offence and may be liable to a fine. File on time. The Registry does not send reminders.

The next annual return (Form NAR1) will automatically reflect the current auditor. No separate filing is needed if the change coincides with the return date.

Practical Timing Considerations

Plan the transition to avoid a gap in audit coverage. The outgoing auditor must complete the audit for the most recent financial year and issue the auditor’s report before the new auditor can take over. If the company changes auditor mid-year, the new auditor will need to perform an opening balance sheet review. Additional procedures may be required to satisfy the new auditor that the prior-year figures are reliable. Budget for those procedures.

Allow at least four to six weeks for the handover. More if the outgoing firm is based overseas or the company’s accounting records are complex. Instruct the outgoing accountant to prepare the audit pack and working papers promptly. Give the incoming accountant full access to the company’s books and records. Start the clock the day the resolution passes.