Auditing Of Accounts

An audit is an objective evaluation and examination of the financial statements of the organization to make sure that the records are an accurate and fair representation of the transactions. The auditing in Hong Kong is completed by an individual who is from outside the firm and hires specifically for this task. This task must be done by a licensed Public Accountant, who has passed the required exams and received the qualifications to practice accounting and prepare Audit Reports for companies.

The IRD would believe the audits from a Hong Kong CPA to validate the accuracy of the return of the taxpayer or other transactions. These CPAs would take the time to thoroughly review the accounts, and offer their opinion on the financial statements of the company. Moreover, if the IRD finds inconsistencies or red flags within the financial statements, this is often taken as a negative connotation which will be seen as evidence of a sort of wrongdoing by the taxpayer. This is often the rationale why it's said to urge the audit report prepared by a highly qualified professional Certified Public Accountant, albeit it means paying more for better work.

Now that you simply understand what an audit report is, you would like to understand who would do the auditing for you. As mentioned above, it's noted as something negative when the IRD has found inconsistencies or exaggerated numbers in your financial statements. Hence, it's better to organize the report before you file the profits income tax return with the IRD, which is that the Inland Revenue Department in Hong Kong

Audits that are prepared by a 3rd party that's not a neighborhood of the company are often a way better help in removing any bias when it involves the financial state of the company. The audits basically search for something that's called the fabric error, within the statements within the specific object. this is often any significant error in your accounts during their review.

And this is often what helps the stakeholders to urge a way of accuracy when considering the state of the company being audited and may assist to permit them to form better, and more informed decisions. Also, the audit that has been performed by an individual who may be a third party would always be an honest one, that might not affect any daily working relationships.

Mostly, all the companies obtain an audit once during a year, and the larger companies may get an audit report quarterly. There are some companies where the audits are a legal obligation thanks to the compelling reasons to intentionally misstate the financial information in an attempt to commit fraud. For a couple of the publicly traded companies, the auditors are utilized as a way to estimate the effectiveness of internal controls on the financial reports.

Do not confuse the external auditor with a bookkeeper, or do not also mix their tasks. aside from this, there are many things that the auditors don't do, that are shared below:

• Create an internal audit report on the knowledge that's provided to the members of the company, for instance, the report of the director.
• Test the capacity of all of the interior controls of the organization.
• Thoroughly review each and each transaction administered by the organization.
• Evaluate the appropriateness of the business activities or decisions or strategies of the organization that are made by the administrators.
• Check every figure within the attestation service report – audits are supported by careful testing and analysis only.
• Let the shareholders realize the standard of the management and therefore the directors, the standard of the danger management controls and procedures of the organization, or the standard of the company governance.

Obviously, these auditors that you simply could be thinking of using for your Hong Kong company can’t do everything for you. they need their limits and what they can’t do are:

• Be there all the time – there's a deadline for preparing the audit reports, which suggests that the auditors aren't within the company in the least times. The elemental purpose of the audit report is to develop an opinion about the knowledge within the financial report recorded as a whole and do not distinguish all the possible irregularities. In short, this just means the auditors do always lookout for the signs of the potential material frauds during the business, but it's not that each one the organizations have a fraud identified. In other terms, auditors are watchdogs, not bloodhounds.
• Predict the longer-term – Up till now, you would possibly have become evident with the very fact that the auditing in Hong Kong is about the precise accounting period that has passed, sort of a previous month or year audit report. Hence, it can't be used for the judgment of something that has the probability of happening within the future. And this cannot offer the reassurance that the organization would continue the business indefinitely.

Confused with all the do’s and don’ts above? Well, the auditor’s work is to form a report on the financial situation during a company after analyzing everything in it. This is often how it goes – they discuss the scope of the audit work with the organization where the management or the directors might request a few additional processes that must be performed by the auditors for the auditing in Hong Kong.

The auditors sustain independence from the director and the management in order that the judgments and the tests are made in an objective manner. The auditors are responsible to work out the extent and the kind of audit procedures that might be performed, which depends on the controls and the uncertainties that are identified. The procedures might include:

• Asking many questions – tons of questions would be asked from tons of the organization’s members. These questions are often from the formal written inquiries to the informal questions asked orally.
• Analyzing accounting and financial records, other related documents, and therefore the tangible items just like the equipment and the plant.
• Making decisions on notable estimations or postulates that the management of the company made once they had prepared the financial report.
• Getting a written confirmation on the actual matters like asking the debtor to validate the debt amount that they owe to the company.
• Testing a couple of the interior controls of the company.
• Following particular procedures or processes that are being performed within the organization.

There are some specific steps that are involved once we mention the method of auditing in Hong Kong or in the other country. These steps are:

• The management of the organization prepared the attestation service report. Also, it's to be prepared following the legal obligations and the financial reporting standards.
• After this, the auditors begin the examination by obtaining an understanding of the activities of the company and analyzing the industry and economic problems which will have affected the business during the reporting period.
• For each significant activity recorded within the attestation service report, the auditors recognize and evaluate any uncertainties which could have a considerable influence on the financial position of the company, and a few of the measures for internal controls.
• Based on the uncertainties and restrictions identified, auditors estimate what management has done to make sure the financial report is accurate, and examine all the supporting evidence.
• After the audit reports are examined, the judgment is formed by the auditors to see if the financial report is an accurate and fair representation of the financial results and financial position of the organization, as per the financial reporting standards.
• In the end, in any case, this has been done, the auditors make the audit report from what they understood by analyzing everything by sharing their opinion of the members or shareholders of the organization.

Are you confused about bookkeeping, accounting, and auditing in Hong Kong? Well, both of them are related to each other, but they're not similar. they're different from one another regarding reliability, analysis, recording, parties served, advantages, and scope. Nonetheless, the difference between accounting vs. auditing vs. bookkeeping are often expressed as follows:

• Bookkeeping is an act of recording the business transactions of the company within the ledgers and therefore the books of the first entry.
• Accounting means the compilation of the bookkeeping as financial accounts, in such a manner where an individual can easily understand the position of the company .
• Auditing is the validation of those accounts to work out the accuracy of them for providing an accurate and fair view of the ultimate accounts and audit report.
• The primary work is completed by the accountant and therefore the bookkeeper, while the ultimate touch is given by the auditor by preparing the audit report.
• When the work of the accountant ends, the work of the auditor begins.
• A bookkeeper and an accountant need to record the transactions within the books of accounts, while an auditor has got to check and verify that such sales and statements are correct and prepare an audit report.
• The accountant can give the knowledge of the records to the management. The accountant doesn't have the responsibility to supply any advice or suggestion while the auditor’s work is to research the accounts records then offer an audit opinion.
• The Auditor has got to be a professional Certified Public Accountant, but to be an accountant, there's no requirement to be a CPA.

In short, the difference between auditing vs. bookkeeping is straightforward, where the bookkeeping work is completed for the business transactions and accounts of the company. On the contrary, auditing has nothing to do with accountancy and bookkeeping, but maybe a significant and investigative analysis of the financial information as per the accounting principles, after the bookkeeping and operations are completed for the fiscal year.

Now that you simply are clear with all the terms, does one know who is that the right auditor to figure in your Hong Kong company? For the auditing in Hong Kong, you'd need a CPA for preparing the audit report. This person must be a CPA accredited in Hong Kong.

There are tons of agencies that provide these services, and there are many incorporated companies that assist you with these services also. But just in case you would like to rent someone from outside, there are some things to stay in mind for the CPA you would like to rent for your Hong Kong company.

Here are other things that you simply ask the person or yourself while you look to rent a CPA for the auditing in Hong Kong:

• Ask the accountant if they need ever provided the services to someone who had a good range of currencies, and therefore the multi-currency bank accounts. If they need it, then you'll easily make certain about your outcome of the audit report within the end.
• Is your CPA using accounting software, or do they only put things into excel? In today’s world, accounting software not only facilitates accounting, but also the accuracy and sharing of data .
• Do you have tons of business transactions, and use various online-based payment platforms? If so, does one want your CPA to understand these? Not all the accountants are conversant in this and you'd need to ask them about it.
• Also, confirm the communication methods are made clear before the hiring is completed. you'd want the accountant to reply timely, and not wait days for a response.
• In the case of offshore activities, is your CPA experienced with profits tax exemption company and tax query letters? Many local Hong Kong CPA may offer attractive prices, but have little to no experience in handling offshore clients and tax query letters. Also, how high is their success rate for profits tax exemptions?
• How is that the reputation of the CPA firm? If you're handling sensitive tax filings like profits tax exemptions, you don’t want your audit to b
• Are you using some online banking industry and is that the CPA you're interviewing comfortable thereupon arrangement? Again, technology. you would like to make certain about the person’s skills since not most are conversant in an equivalent technology.

And if you are overwhelmed with this, then know that this is often just a little list. Of course, you furthermore may get to trust them, and accept as true with the way they ask to communicate! But make certain about the person you're employing in order that your work is completed perfectly without much hassle. Our company can appoint an independent CPA for your company, to properly handle the auditing and taxation requirements.

Even though the bulk of the work falls on the CPA to conduct the audit and taxation matters as per their standards, the company also has some duties and responsibilities for their audit. Generally, they ought to be to supply the relevant financial data and documents and communicate well with the CPA.

• Communication is vital. Expect the auditor to ask tons of questions on the accounts. albeit you'll have a busy schedule, attempt to answer the auditor’s questions if you can. This is often important to maneuver along the method and finish the audit.
• Be willing to be transparent and offer a transparent picture of the financials of the company . The last thing you would like is that the auditor is just about to finish the work, only to know about the company’s Paypal account which you forgot to say. This may delay the audit, and should have consequences if you've got important tax deadlines to satisfy.
• Don’t assume the work is completed after payment. Accounting may be a process, not a product. albeit the CPA is purchased the work, they can't create the numbers from nothingness. Thus you'll have to follow up with the relevant information as they ask.
• Importance of documentation. sort of a lawyer cannot win a case without evidence, an auditor cannot verify figures without documents. make certain to stay organized records of your documents, just in case the auditor needs them to verify figures within the accounts.
• Realizing auditor’s are people too. Although the method is often annoying sometimes, confine the mind the auditor wants to end the task the maximum amount as you are doing . twiddling my thumbs with the method.

These are a number of responsibilities of the company , and although there are other points, this information will assist you in communication with the CPA and the audit process.

After all the story about what auditing in Hong Kong is all about and the way to rent the simplest CPA for the audit report preparation in your company, now allow us to understand why the report is required. So, if you're feeling that you simply don't care about the report and you are okay with the way things are without the assistance of a bookkeeper, accountant or an auditor, it's essential to know that the government cares since this stuff is what would be used to file the taxes of your company.

Yes, that's why the subject has been stressed a lot! allow us to comprehend the on-going statutory compliance and the annual filing requirements for the Hong Kong private limited companies that are explained in short below. With this, you'd know why there's so much fuss about the difference of auditing vs. bookkeeping also because the audit report during a company.

First, allow us to see what the activities that a company has to follow, which is said to be tax filing, and auditing in Hong Kong . In terms of the obligations of the auditing in Hong Kong, a Private Limited company needs to:

• Keep an appointed auditor unless it's a company that considered “dormant” as per the Company Ordinance. A dormant company is the one that has no accounting activities during a fiscal year .
• Keep the subsequent documents and records in the least times: share certificates, updated financial records, audit report, minutes of all the meetings, registers that has share register, and directors register prepared by the bookkeeper.
• Follow the annual accounts filing requirements and therefore the deadlines of the Company Registry and Tax Authority of Hong Kong .
• Keep detailed and accurate accounting reports and the audit report back to enable the assessable profits of the company to be immediately determined. All records must be retained for subsequent seven years from the date of the transaction. This is often something that the bookkeeper takes care of. These reports are then used to get the auditing in Hong Kong done.

And for this, the directors have to record the financial accounts of the company that has the Profit and Loss Account, also as the balance sheet in compliance with Hong Kong’s Financial Reporting Standards (FRS) framework. This is often where the auditing in Hong Kong enters into a company for the audit report back to be prepared in reference to the annual accounts.

The IRD notifies the company about the tax return filing on the first April of every and each year, and for those companies that have just been incorporated, they get the notification on the 18th month after the date of incorporation. It's expected that the businesses should file their income tax return within one month from the day on which the notification was given.

The companies can easily request for the extension of the filing, if it's needed. But if there's a failure to submit the tax return before maturity, there could also be massive penalties placed in terms of payments or maybe prosecution. Also, while the filing is completed , the subsequent documents need to be attached because the supporting documents:

A tax computation showing how the quantity of assessable of profits or the adjusted losses was received.
The record of the company, audit report, and profit & loss statement concerning the idea period.

If you're still not clear about this and need to know more information about the filing of taxes, you'll ask the subsequent section which focuses on the filing of taxes for your company. We'll explain in additional detail on the way to file taxes in Hong Kong , which tax deductions and allowances you'll apply for, and far more.

In case any of the above reports and documents aren't kept, the company and the directors may face a penalty. Also, just in case the accounting reports are out of Hong Kong , the returns need to be present in Hong Kong as outlined by the Financial Reporting Standards (FRS) framework. This has also been modeled on the International Financial Reporting Standards (IFRS), and issued by the International Accounting Standards Board (IASB).

Now, you'll see why it's an enormous deal. you are not going to do something that the government has not made compulsory, but the opposing things need to be fulfilled as per the principles just like the auditing in Hong Kong for the company . If you are feeling that you simply aren't ready to handle these things, then you'll take the assistance of a workplace that is an expert during this like us. We will help with the bookkeeping of the company , and appoint an independent CPA for handling your company’s audit and tax filings.