Who is disqualified from being the auditor of my company?
The auditor cannot be an officer or employee of the company, or a partner or employee of such a person. The same applies to people disqualified for a parent or subsidiary. Professional ethics rules add further independence limits beyond the statute.
Statutory disqualifications (s.393(2)) A person cannot be appointed auditor if they are:
- An officer or employee of the company.
- A partner or employee of an officer or employee of the company.
- Someone who is disqualified in that way for a parent or a subsidiary undertaking of the company, or for a subsidiary of that parent.
An auditor is not counted as an "officer or employee" just because they are auditor.
If it happens after appointment The auditor immediately ceases to hold office and must notify the company in writing within 14 days (s.418). Failing to do so is an offence, with a defence for someone who neither knew nor had reason to believe they had become disqualified.
Ethics rules (HKICPA Code of Ethics) The Code, which AFRC oversees, adds independence rules beyond the statute. For audits of public interest entities (listed and similar companies), a person who has been engagement partner for seven cumulative years must then stay off the audit for five consecutive years (three for the engagement quality reviewer, two for other key audit partners; Section 540). For other companies the firm must judge long-association threats and consider safeguards such as rotating staff off the team. The Code also covers self-review threats and inducements.
For owners Do not appoint a relative who is also an officer or employee, and do not let the audit firm's staff take a role in the company.
Legal basis
- Companies Ordinance (Cap. 622), s.393
- Companies Ordinance (Cap. 622), s.418
- HKICPA Code of Ethics for Professional Accountants
Sources
Applies to 2026 · Last reviewed 29 October 2026
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.
Related questions
- Does every Hong Kong limited company need an audit?Yes. Every Hong Kong company must have an auditor for each financial year and its financial statements audited, whatever its size or whether it trades. The only company that escapes is a qualifying private company that has validly become dormant under s.5 and s.447 of the Companies Ordinance.
- Why does Hong Kong require even a small private company to be audited?Hong Kong's Companies Ordinance makes audit a universal requirement for companies, because an independent report on the accounts protects members, creditors, lenders and the tax authority. Small companies get simpler reporting rules, not an audit exemption.
- Do I still need an audit if my company had no revenue or no business activity?Yes, unless the company has formally become dormant. Having no sales does not make a company dormant in law. If it had any expenses, bank charges or other recorded transactions, the audit duty continues for that year.
- My company is loss-making. Do I still need to audit it?Yes. Profit or loss has no bearing on the audit requirement. A loss-making company is audited every year, and the auditor will also look closely at going concern.
- What is the dormant company audit exemption in Hong Kong?A qualifying private company that has become dormant under s.5 of the Companies Ordinance does not need to appoint an auditor or have its accounts audited while it stays dormant. The exemption is in s.447, not in s.448, which deals with false statements in reports.