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Hong Kong Engagement Standards: A Guide for Businesses

As a business operating in Hong Kong, it’s essential to understand the various standards that govern auditing, financial reporting, and bookkeeping requirements. In this article, we’ll explore the Hong Kong engagement standards (HKSAs, HKSREs, HKSAEs, HKSIRs, and HKSRSs) and provide a comprehensive overview of the bookkeeping requirements, financial reporting requirements, and auditing process.

Hong Kong Engagement Standards

The Hong Kong Institute of Certified Public Accountants (HKICPA) sets the standards for auditing and assurance services in Hong Kong. The engagement standards are designed to ensure that auditors and other service providers meet their professional responsibilities and provide high-quality services to clients.

  • HKSAs: General standards for auditing and assurance engagements
  • HKSREs: Specialized standards for audit reporting
  • HKSAEs: Standards for auditing of financial statements
  • HKSIRs: Standards for review of financial statements
  • HKSRSs: Standards for other assurance services

Bookkeeping Requirements

In Hong Kong, businesses are required to maintain accurate and up-to-date financial records. The Inland Revenue Ordinance (IRO) outlines the specific requirements for bookkeeping, including:

  • Accurate recording of transactions
  • Maintenance of ledgers and journals
  • Preparation of financial statements
  • Submission of tax returns

Financial Reporting Requirements

Companies incorporated in Hong Kong must submit financial statements to the Companies Registry every year. The financial statements must be prepared in accordance with the applicable financial reporting standards, including:

  • HKFRS (Hong Kong Financial Reporting Standards)
  • IAS (International Accounting Standards)

Auditing Process

The auditing process involves several stages, including:

  • Planning: Understanding the company’s business and risks, formulating an audit plan
  • Testing: Obtaining and evaluating audit evidence, testing internal controls
  • Internal Controls Evaluation: Assessing the effectiveness of internal controls
  • Analysis and Opinion: Analyzing audit results, issuing an opinion on financial statements
  • Reporting: Reporting internal control deficiencies, helping to improve internal controls

Audit Report

The audit report is a critical document that provides stakeholders with assurance about the accuracy and reliability of a company’s financial statements. There are two main types of audit reports:

  • Unqualified Report (Clean Report): Issued when the auditor concludes that the financial statements are free from material misstatements
  • Qualified Report: Issued when the auditor has identified certain issues or limitations in the financial statements

Renewal of Business Registration Certificate

Local private limited companies must renew their business registration certificate annually or once every three years. The renewal can be done online or by mail.

Holding an Annual General Meeting (AGM)

Every company incorporated in Hong Kong must hold an AGM once per year. The AGM should be held within six months of the financial year-end, or within 18 months from the date of incorporation for newly registered businesses.

In conclusion, understanding the Hong Kong engagement standards, bookkeeping requirements, financial reporting requirements, and auditing process is essential for businesses operating in Hong Kong. By complying with these standards and regulations, companies can ensure transparency, accuracy, and reliability of their financial statements, which is critical for stakeholders to make informed decisions about the company’s financial health and performance.