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.
Hong Kong has no size-based audit exemption. Each company is a separate legal person with limited liability, so the law wants an independent professional to give an opinion on its accounts every year.
What the audit report covers (ss.405-407)
- Whether the financial statements have been properly prepared in line with the Ordinance.
- For companies not in the reporting exemption, whether they give a true and fair view.
- Whether the directors' report is consistent with the accounts.
- Whether adequate accounting records were kept and the accounts agree with them.
- Whether the auditor obtained all the information and explanations needed.
Who relies on it Members who do not run the business, lenders deciding on credit, counterparties, and the Inland Revenue Department, which asks for audited statements with the profits tax return for companies that have gross income (other than dormant companies).
What reforms did instead of dropping audit The 2014 Companies Ordinance created a "reporting exemption" so qualifying small companies can use a simpler framework and a lighter audit opinion. The Registry's FAQ is explicit that such companies are still audited.
If you are the only shareholder and director, the audit can feel like a formality, but the legal duty is the same.
Legal basis
- Companies Ordinance (Cap. 622), ss.394, 405-407
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 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.
- Who is allowed to audit a Hong Kong company?Only a practice unit can be appointed as auditor of a Hong Kong company: in practice a certified public accountant (practising) or a CPA firm or corporate practice registered with the Accounting and Financial Reporting Council. An employee or officer of the company cannot be its auditor.