- Your first audit covers incorporation to the first accounting reference date.
- Directors can set the first year-end at any date up to 18 months after incorporation.
- The first profits tax return usually arrives about 18 months after incorporation.
- Books kept monthly from day one are what make a first audit quick.
Your first audit in Hong Kong tends to arrive at an awkward moment. The first year-end has passed, the books are behind, and the IRD’s first profits tax return is on its way.
Here’s the short version. The first audit covers the period from incorporation to the first year-end the directors choose, which can be up to 18 months away. The audited financial statements then go in with your first profits tax return. If you’d rather not run it yourself, Sleek’s audit services in Hong Kong are signed by a practising CPA.
In this guide, you’ll learn:
- When your first audit happens and why the first period is longer
- What’s different about a first audit
- When to book the auditor and what to hand over
- What the auditor’s report looks like and what happens next
- What happens if the audit isn’t ready in time
When is your new company’s first audit?
Your first audit covers your company’s first financial statements, from the day of incorporation to the first financial year-end. There’s no grace year for new companies. The Companies Registry‘s position is that every company needs an audit, including small companies using the reporting exemption. The only exception is a dormant company.
An independent practising CPA carries out the audit, not your bookkeeper or accountant.
So when do you need audited accounts for the first time?
- When the first return arrives: GovHK says a new business generally receives its first profits tax return some 18 months after it starts trading or is incorporated. The audited statements go in with it.
- Whatever your size: the IRD requires a return with any gross income to include financial statements and a tax computation. Small corporations with gross income up to HK$2 million can no longer file without them.
Why does the first audit cover a longer period?
The first period can run longer than 12 months because the directors choose when it ends. Under the Companies Ordinance, the first accounting reference period starts on incorporation and ends on the primary accounting reference date. The directors can set that date anywhere within 18 months after incorporation.
There’s a catch on timing:
- Pick the date early: the directors have to specify it before the default date arrives.
- Default date: if they don’t, it’s the last day of the month in which the first anniversary of incorporation falls.
A longer period puts more transactions into one audit, but it also gives you more time before the first one. The trade-offs of choosing your financial year-end depend on your business, so agree the date with your accountant early.
What makes a first audit different from later ones?
A first audit follows the same standards as any other, but a few things only happen once:
- No comparative figures: there’s no prior year, so the statements show one period only and the auditor builds the file from scratch.
- Share capital checked from the start: the auditor matches the shares on your incorporation form and allotment records to the money actually paid in.
- Records from day one: set-up costs and early transactions need receipts and a clear record of who paid what.
- First auditor appointment: for the first financial year, the directors can appoint the auditor rather than waiting for the members at a general meeting.
- New engagement: the auditor signs an engagement letter with you and carries out its own client checks before work starts.
None of this is difficult if your bookkeeping duties have been kept up since incorporation.
When should you book your first audit?
Book your first-year audit before the year-end, then work back from your first profits tax return. After the year-end, the books have to be closed before the auditor can start. The signed report then has to be ready before the return is due.
| Stage | When | What happens |
|---|---|---|
| Incorporation | Day one | The first accounting reference period starts |
| First year-end | Within 18 months of incorporation | The directors’ chosen date (or the default) closes the first period |
| Books closed | Soon after the year-end | Bank reconciliations, invoices and ledgers brought up to date |
| Audit fieldwork | Usually 4 to 8 weeks at Sleek, longer if records are incomplete | The auditor tests balances and transactions and raises queries |
| Report signed | After queries are cleared | Directors approve the statements; the auditor signs the report |
| First profits tax return | Usually issued about 18 months after incorporation | Filed with the audited statements |
Booking early means the books are closed with the audit in mind. Your own dates sit in the Hong Kong tax filing deadlines calendar.
One deadline doesn't wait for the audit. A private company files its annual return within 42 days after the anniversary of incorporation, whether or not the audit is finished.
What documents does the auditor need?
The auditor needs everything that supports the numbers in your first set of accounts. This audit documents checklist covers what most first audits need. Items marked typical are common requests, so confirm the full list with your auditor.
| Document | Why the auditor needs it |
|---|---|
| Bank statements for the whole first period | Confirm cash balances and every transaction |
| Sales and purchase invoices | Support income and expenses |
| Contracts | Support revenue, commitments and leases |
| General ledger, income statement and balance sheet | The basis of the financial statements |
| Incorporation form (NNC1), articles and Business Registration Certificate | Confirm the company’s details and share capital |
| Share allotment records and proof of capital paid (typical) | Match issued shares to money received |
| Payroll and MPF records, if you have staff | Support staff costs and contributions |
| Fixed-asset purchase documents (typical) | Support equipment and other assets |
Keep everything once the audit is done. Accounting records must be kept for 7 years after the end of the financial year they relate to.
Paid company expenses yourself before the bank account opened? Keep those receipts and record the amounts as a director's loan or as capital, so the auditor can trace them.
What does the auditor’s report look like?
The independent auditor’s report is a few pages at the front of your audited financial statements, addressed to the company’s shareholders. It usually runs in this order:
- Opinion: whether the statements are properly prepared under the Companies Ordinance. Unless the company uses the reporting exemption, it also says whether they give a true and fair view.
- Basis for opinion: confirms the audit followed Hong Kong Standards on Auditing.
- Responsibilities of the directors: the directors prepare the statements and run the internal controls behind them.
- Auditor’s responsibilities: what the auditor did to reach the opinion.
- Signature block: the firm or practising CPA, marked Certified Public Accountants (Practising), with the date and place.
The result you’re aiming for is an unmodified, or clean, opinion. A qualified, adverse or disclaimer opinion means the auditor disagreed or couldn’t get enough evidence. The audit opinion types each carry different consequences for banks and the IRD.
What happens after the report is signed?
The directors approve and sign the financial statements and the directors’ report, and the auditor signs and dates the report. The audited statements then go in with your first profits tax return, along with the tax computation, as part of filing your profits tax return.
Before the auditor signs, expect two requests:
- Representation letter: the directors confirm that the records and explanations they gave are complete.
- Signatures: original signatures are often needed on the statements, the directors’ report and that letter, so ask early whether electronic signatures are accepted.
From the second year on, the cycle repeats every 12 months, with last year’s audited figures as the comparatives. The members normally appoint or reappoint the auditor for each later year.
What happens if your first audit isn’t ready in time?
A late audit means a late return, because the due date on your first profits tax return doesn’t move. If you need more time, apply to the IRD in writing before the due date, with your reasons.
The IRD’s penalty policy sets out what can follow a late return:
- Prosecution: failing to file on time without reasonable excuse carries a fine of HK$10,000, plus up to three times the tax undercharged (section 80(2) of the Inland Revenue Ordinance).
- Additional tax instead: the IRD can assess additional tax rather than prosecute. For a first late profits tax return, this is generally 10% of the tax undercharged, or 20% if the return comes in after two or more estimated assessments.
- Estimated assessment: the IRD can estimate your profit and assess tax on that figure.
The annual return runs on its own clock: a private company that files late pays a higher fee, up to HK$3,480, instead of HK$105.
How Sleek handles your first audit
Sleek’s audit service is built for small Hong Kong companies, including a new company audit at the first year-end.
With Sleek, you can:
- Work with a named audit partner: an HKICPA CPA (Practising) signs your report, and the same person signs every year.
- Agree the plan up front: scope, timeline, responsibilities and price are agreed before work begins.
- Get tax filing included: profits tax calculation and filing of your BIR51 come with the Standard plan.
- Keep your books audit-ready: with our accounting and bookkeeping service, records are kept monthly so the first audit isn’t a scramble.
Audits for companies with assets below HK$10M start from HK$5,500 per financial year; you can see audit pricing for the current plans. If your first year-end is close, check your books are up to date first, then book the audit.
Ready for your first audit?
Prices may vary with current promotions — check the latest on the relevant page.
450,000
businesses worldwide.
from 4,100+ reviews.
satisfaction rate from
16,000 surveyed clients.
FAQs on first audit hong kong
My company has had no income yet. Does it still need an audit?
Yes, unless it’s dormant. A company that has traded, even at a loss, still needs an audit. The reporting exemption for small private companies changes what’s reported, not whether an audit is needed. A company with no accounting transactions may be able to become a dormant company instead, and the small company audit exemption rules show where the line sits.
Can we change the first year-end after it's set?
Yes, within limits. Directors can set a new accounting reference date, but no period can run beyond 18 months. They can’t extend again within 5 years of an earlier extension unless the members approve or the date matches a holding company’s. Private companies don’t notify the Companies Registry of the change.
Will I get the auditor's report as a PDF?
With Sleek, yes, through your dashboard. The signed statements and report are stored there, so you can download them when a bank or investor asks. If you need a certified or original copy for a particular purpose, ask your auditor in advance.
What if our books haven't been kept since incorporation?
You’ll need catch-up bookkeeping first. The auditor can’t start until the books are complete for the whole first period. Work through the audit documents checklist above, gather receipts from incorporation onwards, and allow extra time before your first profits tax return is due.
