What are the directors' responsibilities for the accounts, and the auditor's?
Directors prepare, approve and sign the financial statements and directors' report and must keep proper accounting records. The auditor forms and reports an independent opinion. Audit does not shift the directors' responsibility to the auditor.
Directors
- Keep accounting records that explain the company's transactions (s.373) and preserve them (s.377).
- Prepare financial statements for each financial year (s.379), consolidated if a holding company.
- Approve and sign the statement of financial position (s.387) and the directors' report (s.391).
- Give the auditor access and information (s.412) and avoid misleading statements (s.413).
- Lay and send accounts within the deadline (s.431).
- A failure to take reasonable steps to comply with s.379 carries a fine of HK$300,000, and imprisonment up to 12 months if wilful.
Auditor
- Reports to members on whether accounts are properly prepared and, for non-exempt companies, true and fair (s.406).
- Investigates whether records were adequate and agree with the accounts (s.407).
- Signs the report (s.409) and must not include false or misleading content (s.408).
The split The directors own the accounts. The auditor expresses an opinion, based on evidence and sampling, and cannot catch every error.
Practical Do not sign accounts you do not understand. Ask the auditor to explain adjustments and disclosures before you approve.
Legal basis
- Companies Ordinance (Cap. 622), ss.373, 377, 379, 387, 391, 406-409, 412-413, 431
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.
- What does a statutory audit involve, step by step?The auditor accepts the engagement, plans around risks, tests balances and transactions with evidence, obtains third-party confirmations, reviews events after year-end, agrees adjustments, obtains a management representation letter and issues a signed report. The directors approve the accounts.
- What is going concern in an audit and what happens if there is doubt?Going concern means the company can keep operating for the foreseeable future. Management assesses it and the auditor tests that assessment, covering at least twelve months from the date of the financial statements. Doubt must be disclosed, and the auditor's report may draw attention to it or be modified.