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.
Under the Companies Ordinance (Cap. 622), an auditor must be appointed for each financial year of a company (s.394), and the auditor must report to the members on the company's financial statements (s.405). The Companies Registry's own guidance states that all companies are audited, including companies that fall within the reporting exemption for small companies.
What does not change this
- Being small, privately owned or owned by one person.
- Having no staff, no premises or low turnover.
- Making a loss, or having no revenue in the year.
The one exception A private company that has formally become dormant (s.5) is relieved from audit by s.447. This is not automatic. It needs a special resolution and delivery of that resolution to the Registrar, and it ends as soon as the company enters an accounting transaction. See the separate answers on dormant companies.
What you can simplify Small private companies can use the reporting exemption, which allows simpler financial statements and a lighter form of audit opinion. It does not remove the audit itself.
Banks, the Inland Revenue Department and the Companies Registry all work on the basis that an audit has been done, so treating it as optional is a common and costly mistake.
Legal basis
- Companies Ordinance (Cap. 622), s.394
- Companies Ordinance (Cap. 622), s.405
- Companies Ordinance (Cap. 622), s.447
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
- 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.
- 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.