In this course · 6 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
Audit firms in Hong Kong are regulated for anti-money laundering and counter-terrorist financing (AML/CFT), and the AFRC inspects their compliance. Firms therefore verify who owns and controls a client before accepting it, which is separate from the audit tests.
Why it happens The AFRC's inspection work covers practice units' audit quality, quality management and their compliance with anti-money laundering and counter-terrorist financing (AML/CTF) requirements. A firm that does not carry out proper checks risks regulatory action.
What firms usually collect
- Identity documents and addresses for owners, directors and anyone controlling the company.
- Corporate documents showing the ownership structure, including overseas holding companies.
- Information on the nature of the business and the source of funds or wealth, in higher-risk cases.
- Ongoing monitoring updates during the engagement.
Is this part of the audit? It is part of the firm's client acceptance and risk process, not the audit procedures themselves. The auditor also considers money laundering law as part of understanding the business, but the audit is not designed to detect all such activity.
Owners' tips
- Supply documents early, certified where the firm asks.
- For overseas owners, expect extra documents and time.
- Do not take offence; refusal can mean the firm cannot act.
Legal basis and sources
The law
- Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615)
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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