Hong Kong Audit Requirement and the Reporting Exemption
Searches for a small-company audit exemption in Hong Kong usually end at the wrong answer. The reporting exemption in the Companies Ordinance simplifies what qualifying companies disclose; it does not remove the audit. This guide states the requirement, what the exemption changes, and the statutory size tests, so a director can put the right question to a qualified adviser. To compare registered practices, start from the audit and accounting directory.
Which companies still need an audit
The Companies Registry says audit of financial statements is required for all companies, including companies falling within the reporting exemption, except dormant companies under section 447. Qualifying for simplified reporting therefore does not remove the auditor’s report.
The same Companies Registry guidance says a company’s directors must prepare financial statements for each financial year that comply with sections 380 and 383. Appointing a provider does not move that duty. Whether a particular company can be dormant under section 447 depends on its facts; keep that question open for the company’s own adviser.
What the reporting exemption changes
The Companies Registry describes the reporting exemption as exemptions available to private or guarantee companies, other than certain companies specifically excluded, that are qualified to prepare simplified accounts and directors’ reports. The exemptions relate to specific requirements in the financial statements, the directors’ report, and the auditor’s report.
Read the exemption as a change in disclosure and presentation, not a change in the audit requirement. The Companies Registry guidance states that a company inside the reporting exemption still has its financial statements audited, so the company still appoints an auditor and still receives an auditor’s report.
The size tests for simplified reporting
The Companies Registry lists the qualifying criteria for the reporting exemption. The main routes are:
| Route | Statutory conditions |
|---|---|
| Small private company, or holding company of a group of small private companies | Two of the three following conditions in a financial year: total revenue not exceeding $100 million, total assets not exceeding $100 million, employees not exceeding 100 |
| Small guarantee company, or holding company of a group of small guarantee companies | Total revenue not exceeding $25 million in a financial year |
| Eligible private company, or holding company of a group of eligible private companies | Two of the three following conditions in a financial year: total revenue not exceeding HK$200 million, total assets not exceeding HK$200 million, employees not more than 100; plus 75% approval from members of the holding company and no member voting against the resolution |
The same Companies Registry guidance also covers other routes, including a private company outside a corporate group with unanimous members’ written agreement and mixed groups. Group tests aggregate across the group. Which figures count, and for which financial year, is an assessment for the company’s own adviser working from the Ordinance and the company’s records.
Companies that cannot use the reporting exemption
The exemption is not open to every company that passes a size test. The Companies Registry notes that companies specified in section 359(4), which includes for example a bank or an insurance company, sit outside the reporting exemption. A public company is also outside the private or guarantee company routes described in that guidance.
If a company sits in a regulated sector or inside a group, do not conclude eligibility from the size figures alone. Ask the auditor or another qualified adviser to confirm the company’s position against section 359 before relying on simplified reporting.
Who can act as the company auditor
Whoever audits the statements must hold the statutory registration. The AFRC says a CPA intending to perform statutory audits in Hong Kong must obtain a practising certificate from the AFRC, and that only a CPA (practising), CPA firm, or corporate practice registered with the AFRC can hold an appointment or render service as a company auditor under the Companies Ordinance. Check the proposed practice against the AFRC register and keep the check date.
The audit output also feeds tax filing. The IRD’s current profits-tax filing tips tell a filer to submit the return with the signed audited financial statements, or a photocopy of the signed accounts certified true by a director/principal officer of the company or a certified public accountant. Plan the audit timetable with that handoff in mind.
Common questions
Does Hong Kong have a small-company audit exemption?
No. The Companies Registry says audit of financial statements is required for all companies, including companies falling within the reporting exemption, except dormant companies under section 447. The reporting exemption simplifies disclosure for qualifying companies; the audit remains.
What does the reporting exemption change?
The Companies Registry describes it as exemptions for qualifying private or guarantee companies to prepare simplified accounts and directors’ reports, covering specific requirements in the financial statements, directors’ report, and auditor’s report. It does not remove the requirement to prepare financial statements or to have them audited.
What are the size tests for a small private company?
The Companies Registry’s qualifying criteria for a small private company, or a holding company of a group of small private companies, require two of the three following conditions in a financial year: total revenue not exceeding $100 million, total assets not exceeding $100 million, and employees not exceeding 100. Confirm the assessment with a qualified adviser before relying on it.
Who is allowed to sign the auditor’s report?
The AFRC says only a CPA (practising), CPA firm, or corporate practice registered with the AFRC can hold an appointment or render service as a company auditor under the Companies Ordinance. Ask the proposed practice for the registered name that would appear on the report and verify it on the AFRC register.
Do audited statements still matter for the tax return?
Yes. The IRD’s current filing tips tell a filer to submit the profits tax return together with the signed audited financial statements, or a certified true photocopy of the signed accounts as described on that page. Check the instructions for the relevant year of assessment, because the page is year-specific.
Sources
All information is compiled from sources available on the open internet.
- Companies Ordinance - Accounts and Audit — Hong Kong Companies Registry. Accessed 2026-07-30.
- Application of Practising Certificate — Accounting and Financial Reporting Council. Accessed 2026-07-30.
- Filing tips for 2025/26 Profits Tax Return — Hong Kong Inland Revenue Department. Accessed 2026-07-30.