Will the auditor attend our stock count and check our fixed assets?
If stock is material, the auditor should attend the count or perform alternative procedures to check that it exists and its condition. For fixed assets, expect checks of ownership, additions, depreciation and disposals against invoices, contracts and registers.
Stock (inventory) HKSA 501 deals with attendance at physical inventory counting.
- Where stock is material, the auditor normally observes the count at or near the year-end.
- If attendance is impracticable, the auditor must carry out alternative procedures to obtain evidence on existence and condition.
- If attendance is impossible due to unforeseen circumstances, the auditor may count on another date and test movements in between.
What to prepare
- A count plan, count sheets and the final listing, reconciled to the accounting records.
- Evidence of cut-off (last receipts and shipments).
- Stock held by third parties or in other locations.
Fixed assets Expect testing of:
- Additions against invoices or contracts, and ownership.
- Depreciation rates and calculation.
- Disposals, write-offs and impairment signs.
- Leases and right-of-use assets, where the framework requires them.
If you cannot support a number Where the auditor cannot get enough evidence for a material balance, the report may be qualified or disclaim an opinion (HKSA 705).
The amount of work depends on the auditor's judgment about risk and materiality.
Legal basis
- HKSA 501
- HKSA 705
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.
- 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.
- How do I make my Hong Kong company dormant to avoid the audit?Check the company qualifies, pass a special resolution declaring it will become dormant from a stated date, and have the directors deliver that resolution to the Companies Registrar. Dormancy takes effect from the delivery date or the later date in the resolution.
- Does a dormant Hong Kong company still have to file a profits tax return?Dormancy under the Companies Ordinance relieves the company from audited accounts, and IRD accepts a profits tax return from it without the audited statements. It does not by itself cancel the duty to file a return when IRD issues one.