It is often advantageous to start out a business in Hong Kong thanks to the simple taxation system, also as it’s low tax rates and it’s a territorial concept for profits tax for Hong Kong companies. This is often further illustrated by the friendly regulations for businesses and corporations, with the Hong Kong government’s eyes assail lowering company tax rates below 10% for little businesses within the future. However, to effectively operate this legal system, the Hong Kong legal system relies heavily on a high level of understanding and compliance from businesses and taxpayers.
Not only should businesses understand when and the way to pay taxes, but also that every company’s accounts must be reviewed and audited by a Hong Kong Certified Public Accountant. This technique could also be different from other countries, however, compliance with the taxation system is of the utmost importance in instilling an efficient tax regime in Hong Kong.
An audit by definition may be an official review and verification of accounts, often by a 3rd party. The rationale for this is often to get a real and accurate view of the financial statements of a corporation, without internal bias. Unlike other countries, the financial statements, profits and supreme taxes payable to the government are reviewed and audited in Hong Kong. This is often to make sure compliance with the relevant taxation laws. Otherwise, companies may change or alter their financial information, either intentionally or in error, to supply a false view of the financial information of their company. This is able to create an ineffective system for correct checking and compliance by the Inland Revenue Department, or IRD, for the many thousands of companies in Hong Kong. Thus company accounts and financial statements are required to be audited by a 3rd party.
This audit in Hong Kong is conducted by a licensed Hong Kong Certified Public Accountant, or CPA for brief. These are tax professionals who have studied and passed the required examinations to point out their competency in accounting, auditing, and taxation in Hong Kong. Companies can find a Hong Kong CPA to assist them to review their accounts and file their annual taxes.
The IRD will still review the audit work from these CPAs from time to time. If they find inconsistencies or red flags within the audit reports, they'll follow up with additional queries and requested further supporting documents, as this might be seen as a negative connotation for the CPA and taxpayer if errors are found. This is often why it's recommended for the company to require time to seek out a highly qualified and professional CPA, albeit it requires paying a touch more for better work.
According to the Hong Kong Companies Ordinance, Hong Kong company companies are required to perform an annual audit for the financial statements by a Hong Kong practicing Certified Public Accounts (CPA). This may apply to all or any Hong Kong company firms, whether commencing business in Hong Kong or abroad. Inland Revenue Department in Hong Kong (IRD) will issue the primary Profit tax return form in approximately 18 months after the incorporation of the company. The PTR will get to be submitted alongside the audit report and tax computation.
The audit report and filing should be complied with following the regulations and requirements of IRD. The rationale for conducting an audit is to make an opinion on whether the knowledge presented within the financial report is reflecting a real and fair view of the company.
The company should provide financial statements to the auditor to point out the general business. The financial statements should include an earnings report, a record, and a ledger of the business transactions, if possible. The auditor would then review these statements, and alongside the supporting documents, review their accounts and offer their opinion on the accuracy of the financial statements.
An auditor is responsible to review the company’s accounts and acquire sufficient appropriate audit documentation for every company. This is often not just for them to conduct a correct review of the company accounts, but also for them to possess proper records, just in case the IRD requests for further documentation for the accounts.
For a CPA to conduct the audit efficiently, the company should prepare the subsequent documents for the audit:
These documents would be taken under consideration by the CPA not just for the financial information and supporting documents, but also for a way well your internal system and organization of the company operations are.
The audit process comprises varied steps for the auditor to accurately check and verify not only the financial figures but also the company as a whole. All of the knowledge and documents provided help to supply confidence that the financial statements show a real representation of the company.
Here are some steps that are involved once we mention the method of auditing in Hong Kong or in the other country.
The whole audit process will contain more steps and tasks performed by the auditor, also as their questions and adjustments on the accounts. However, this brief outline should offer you a far better understanding of the method of the audit as performed by the CPA.
You can also inspect our more comprehensive description as in our Guide.
Once the audit is finished and therefore the CPA has received all the returned signed audit reports and audit documents, they're going to send the finished audit report and tax computation to the IRD. it's necessary to figure with the auditor to supply them the signed audit reports and other audit documents, as albeit the audit add complete, the IRD will only accept the first text of the signed audit report from the company directors.
Once the IRD receives these documents, they're going to take a while to review the figures and supply the taxes payable schedule, within the case where the company has assessable profits. This might take them a couple of weeks to even a couple of months to review, because the IRD could also be busy with other tax filings, especially around April, August and November.
After the primary initial audit, your CPA should advise you on when to organize the company documents and statements for subsequent audit. It's highly recommended to organize these documents before time, as if the company waits until they receive the PTR, they're going to only have one month to organize the file the audit report and tax filings. This is often not enough time to perform all the relevant audit procedures and documents, thus it’s suggested to organize the documents before time.
This article is here to supply more information on the sector of auditing and it impacts your company and tax responsibilities. Don’t feel overwhelmed if this contains tons of previously unknown information, because the field of auditing is deep and takes some people years to review and understand. Also, the method is predicated on documentation and formalities, so be patient when handling your company’s audit and CPA.
We are here to help you together with your company accounts and tax responsibilities in Hong Kong. We offer comprehensive bookkeeping services at a good price, and that we can appoint an independent CPA in handling your company’s audit and tax filings. be happy to contact us for a free quote, tax information or tax status for your company.