In this course · 4 of 7
Course 7
See what the auditor checks
7 lessons · 7 min
- 1What are audit confirmations, and why does the auditor write to my bank?
- 2Will the auditor attend our stock count and check our fixed assets?
- 3How does an audit treat director loans and related-party transactions?
- 4Will an audit check payroll and MPF contributions?
- 5Does the audit cover the Significant Controllers Register?
- 6Why does my auditor ask for ID and source-of-funds information?
- 7Do I need consolidated accounts for my Hong Kong holding company?
The short answer
Yes. Payroll is usually a material cost, so auditors test salary records, employer and employee MPF contributions, accruals for unpaid leave or bonuses, and director remuneration. It is an accounting check, not a full compliance review of employment law.
What the auditor usually looks at
- Payroll listing agreed to the ledger and bank payments.
- MPF contributions: whether the amounts recorded agree with trustee statements and whether any are outstanding at the year-end.
- Accruals: unpaid wages, bonuses, leave pay and any long service or severance liabilities.
- Director remuneration and the disclosure required in the notes (s.383).
- Evidence of staff numbers, which also matters for the "small company" thresholds (average employees not exceeding 100).
What you should prepare
- Payroll summaries for each month, MPF trustee statements and the employer's return documents.
- Employment contracts for key staff.
- Records of any bonuses promised or declared after the year-end.
Limit An audit gives an opinion on the financial statements. It does not certify that you comply with the Employment Ordinance or the MPF law. If the auditor finds unrecorded liabilities, they ask you to adjust the accounts.
The number of payroll items tested is the auditor's judgment, using sampling based on risk and materiality.
Legal basis and sources
The law
- Companies Ordinance (Cap. 622), s.383
- Companies Ordinance (Cap. 622), Schedule 3 (employee numbers)
General information for business owners, not legal, tax or professional advice. Rules change, so check the sources or ask a licensed professional before you act.
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