Can my accountant also be my auditor in Hong Kong

Can My Accountant Also Be My Auditor in Hong Kong

No. The same person or firm that acts as your company's accountant cannot also serve as its statutory auditor in Hong Kong. Business owners often assume the professional who keeps their books is best placed to audit them, but Hong Kong law and the Hong Kong Institute of Certified Public Accountants (HKICPA) auditor independence rules prohibit this arrangement.

The Statutory Audit Requirement

Every Hong Kong incorporated company must have its financial statements audited annually under the Companies Ordinance (Cap. 622). A practising certified public accountant registered with the HKICPA must carry out the audit, and only a registered practice unit may sign the auditor's report. The audit's purpose is to provide an independent opinion on whether the financial statements give a true and fair view of the company's financial position. Independence is the foundation of that opinion.

Accountant Auditor Independence Hong Kong

The auditor must be independent of the company being audited. If the same firm has prepared the accounting records, maintained the books, or prepared the financial statements, it cannot later audit those same records. This is the self-review threat: the auditor would be checking its own work, which undermines the objectivity of the audit opinion. The HKICPA Code of Ethics for Professional Accountants sets out the specific independence requirements. A firm that provides bookkeeping or accounting services to a client is disqualified from acting as that client's auditor.

HKICPA Auditor Independence Rules

The HKICPA auditor independence rules treat the provision of accounting and bookkeeping services to an audit client as a threat to independence that cannot be reduced to an acceptable level by safeguards. A practice unit cannot maintain the accounting records of an audit client or prepare the financial statements that it will later audit. This prohibition applies whether the services are provided by the same individual or by different partners within the same firm. The rules apply to all companies subject to a statutory audit, regardless of size.

Can My Bookkeeper Be My Auditor HK

The same restriction applies to bookkeepers. If a bookkeeper is engaged to record daily transactions, reconcile accounts, or prepare trial balances, that person cannot later audit the same financial statements. The bookkeeper's work forms part of the accounting records, and auditing those records would involve reviewing the bookkeeper's own work. Even if the bookkeeper is a certified public accountant, the independence rules prevent them from switching roles for the same company. The company must engage a separate practice unit for the audit.

Practical Implications for Business Owners

You need two separate engagements: one for accounting and bookkeeping services, and another for the statutory audit. Many Hong Kong companies use a corporate service provider or an accounting firm for their day-to-day bookkeeping and financial statement preparation, then appoint a different HKICPA-registered practice unit to perform the audit. The auditor will request the company's accounting records, trial balances, bank statements, invoices, and supporting schedules. The auditor's report will state whether the financial statements give a true and fair view and whether they comply with the Companies Ordinance. If the auditor identifies a material uncertainty about the company's ability to continue as a going concern, or if there is insufficient evidence, the auditor may issue a modified opinion.

What to Do Next

When selecting an auditor, confirm in writing that the practice unit is independent of your company and has not provided any accounting or bookkeeping services to you during the period under audit. The engagement letter should state that the auditor complies with the HKICPA Code of Ethics. If you already have an accountant who is a practising certified public accountant, ask them to recommend an independent audit firm. The cost of the audit is separate from the cost of accounting services, and both are necessary for compliance with the Companies Ordinance.