Must directors give the auditor information, and what if they refuse?

The auditor's rights (s.412)

• Access to the company's accounting records.
• To require related entities (including officers, employees and past officers or employees at the relevant time) to provide information or explanation reasonably needed for the audit. They must respond as soon as practicable.
• For overseas subsidiaries, the auditor can require the company to obtain information from the subsidiary, its officers, auditors and record holders.
• The auditor also has rights in relation to general meetings (s.411).

Offences (s.413)

• Failing to supply information when required: a level 4 fine (HK$25,000), plus HK$700 a day if it continues. It is a defence to show it was not reasonably practicable.
• Giving a statement that is false, misleading or deceptive in a material respect, knowing it is or being reckless: up to HK$150,000 and 2 years' imprisonment on indictment, or a level 5 fine (HK$50,000) and 6 months on summary conviction.

Limits Legal professional privilege is not overridden (s.412(8)).

What happens in the audit report If the auditor cannot obtain all necessary and material information and explanations, they must say so in the report (s.407(3)). This can lead to a qualified opinion or a disclaimer, which lenders and IRD may question.

Respond to queries in writing, in good time, and keep a copy.