What does an auditor ask for in a Hong Kong audit

What Does an Auditor Ask for in a Hong Kong Audit

Every Hong Kong company must have its financial statements audited annually by a practising certified public accountant registered with the HKICPA. The auditor forms an opinion on whether those statements give a true and fair view of the company's position and comply with the relevant financial reporting framework. This requires evidence. The answer to what does an auditor ask for is the standard request list sent to every client at the engagement's start.

Hong Kong Audit Request List

The auditor issues a formal request list, typically an audit engagement letter with an attached schedule. That schedule is the hong kong audit request list. It requests the general ledger and trial balance for the year under audit. It demands bank statements and reconciliations for every account held. The list also calls for aged listings of trade debtors and creditors, sales invoices with supporting delivery notes or contracts, and purchase invoices with corresponding purchase orders. Further requirements include the fixed asset register, depreciation schedule, and all loan agreements and financing documents. Finally, it requires board minutes and resolutions from the year, the statutory registers (members, directors, charges, and the Significant Controllers Register), and the company's accounting records and bookkeeping files.

The auditor uses these documents to verify transactions are recorded completely and accurately, and to assess the company's overall financial position.

Auditor Checklist for Hong Kong Company

An auditor checklist for hong kong company is the audit team's internal working document. It is not sent to the client, but its contents drive the auditor's requests. The checklist covers understanding the business, including its activities, customers, suppliers, and any related party transactions. It requires an assessment of internal controls over financial reporting, identifies risks of material misstatement (including fraud risk), and determines materiality thresholds. The auditor confirms the applicable financial reporting framework: HKFRS, HKFRS for Private Entities, or SME-FRF and SME-FRS for companies qualifying for the reporting exemption under section 359 of the Companies Ordinance.

The auditor also considers whether the company is a going concern. If doubt exists, they will request cash flow forecasts, budgets, and evidence of financing arrangements.

Documents Needed for Statutory Audit HK

The documents needed for statutory audit hk fall into three groups: financial records, supporting evidence, and statutory records.

Financial records: - Trial balance and general ledger - Sales and purchase ledgers - Cash book and bank statements - Payroll records and MPF contribution summaries - Intercompany account reconciliations

Supporting evidence: - Sales invoices and contracts with major customers - Purchase invoices and supplier contracts - Loan agreements and bank facility letters - Board minutes approving significant transactions - Correspondence with the Inland Revenue Department, including profits tax returns and any assessments

Statutory records: - Certificate of Incorporation and Business Registration Certificate - Articles of association - Register of members and register of directors - Register of charges - Significant Controllers Register - Minutes of board meetings and members' meetings

The auditor will also ask for a management representation letter signed by the directors, confirming that all relevant information has been provided and the financial statements are complete.

What the Auditor Does with the Documents

The auditor tests every item. Bank statements are reconciled to the general ledger. Sales invoices are traced to cash receipts; purchase invoices are matched to payments. Debtor and creditor ageing is reviewed for recoverability and completeness. The fixed asset register is checked against physical assets where material. Loan agreements are read to confirm their terms are correctly reflected in the financial statements.

Board minutes are reviewed to confirm major transactions, share issues, director appointments, loan approvals, were properly authorised. Statutory registers are checked for compliance with the Companies Ordinance, including maintenance of the Significant Controllers Register and appointment of its designated representative.

Preparing for the Audit

Keeping accounting records up to date throughout the year makes the audit process straightforward. Treat the auditor's request list as a schedule to be completed, not a surprise. Directors must ensure all bank statements, invoices, contracts, and board minutes are filed and accessible. If a document is missing, the auditor will require an explanation and may need to perform alternative procedures, which adds time and cost.

The auditor will also confirm the company's financial year end and accounting reference date. Any change to the accounting reference date must have been notified to the Companies Registry on Form NAC4.

After the Audit

Once the audit is complete, the auditor issues an auditor's report. A satisfied auditor issues an unqualified report. Issues result in a qualified report or one containing an emphasis of matter. The audited financial statements, the auditor's report, and the directors' report are then laid before the members and filed with the Companies Registry as part of the annual return on Form NAR1, unless the company has declared itself dormant.

The auditor also provides a management letter highlighting weaknesses in internal controls or areas for accounting record improvement. This letter is not filed with any authority; it is addressed to the directors for their action.