Annual Hong Kong company accounts auditing may seem like just another element of regular tax and accounting for HK companies, but in fact the CPA's report may have far-reaching consequences.
This means that it is in fact a very important yearly task for Hong Kong businesses to undertake.
But what makes it so important, and why should we be aware of it before even undertaking Hong Kong company registration?
Keep reading as we explore...
Take No Chances With Accounts From The Start
If you're interested in doing business in Hong Kong then you need to understand that there are three steps that need to be considered when setting up and running a Hong Kong company:
- Hong Kong company registration - This is where you go through all of the legalities to open your company, bank account, and submit the relevant documentation to the government.
- Accounting & tax - Keeping quarterly and yearly accounts and filing them for tax purposes.
- Annual Hong Kong company accounts auditing - A CPA (Certified Public Accountant) is employed to audit your accounts and provides a report as to their accuracy along with filing them.
Setting up the company is a one-off task, but once you're up-and-running in Hong Kong keeping your accounts compliant become very important.
Remember, they're going to be audited annually by an expert CPA.
This means that it's extremely important to be sure that your accounts are handled professionally.
In the unlikely event that you do them yourself, then you must be sure that no errors will be made. But this option is only realistic for sole traders or SMEs with very small scope of business, with staff who are very familiar with accounting.
If this doesn't describe your business then you will need to consider either hiring a local accountant onto your staff, or outsourcing your accounting to a local expert to handle.
By cutting corners with your accounting you increase the likelihood that the CPA will uncover compliancy issues which will then be duly reported to the authorities by them.
This is not a good thing.
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Annual Hong Kong Company Accounts Auditing: Friend Or Foe?
CPAs in Hong Kong wield considerable power over businesses.
Hong Kong stands apart from many other Asian countries and territories in that it has an exceptionally low level of corruption. Ever since the 1970s, the territory has striven to bring in and enforce a multitude of anti-corruption laws. Whilst many apply to public servants and situations of bribery, the overall mood of Hong Kong is that dishonesty and corruption will not be tolerated.
This is why CPAs are a important cog in the wheel of Hong Kong's industry.
It's their responsibility to report businesses who are not compliant, and their report could affect:
- Your ability to get a loan from banks
- Trust from vendors and clients
- Your relationship with the government, inviting closer scrutiny at all times
- The legitimacy in which your company is viewed
- Whether your claims for 0% tax for offshore revenue will be accepted
The way to make sure that your annual audit runs smoothly?
Be sure that your accounts are completed professionally, your CPA is an expert, and that they understand your business.
Conclusion
Waiting until the CPA conducts your annual accounts audit for your Hong Kong company to find that there are accounting issues is a bad idea.
Whilst you're unlikely to be purposefully breaching any laws, if mistakes have been made it is their duty to report them, and the consequences could affect your ability to do business in Hong Kong successfully in the future.
So it's crucial to stay ahead of the curve and make sure that your accounts are compliant before it's time to audit them, and then if there are any issues your business can get ahead of them before problems hit you.
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Do you keep your own books in Hong Kong, or outsource to an accountant? What issues have you faced with accounting and the annual audit? How did you overcome them?
Please let us know if you have any questions or comments on accounting and auditing or Hong Kong company registry by leaving a comment below.
