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3 Key Tips to Help through Audits Effortlessly in Hong Kong

 

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Table of contents

  1. What is an Audit?
  2. Regularly Update Accounting Records
  3. Perform Regular Reconciliations
  4. Collaborate with Professional Accountants
  5. Consequences of Late Filing of Profits Tax Returns

 

Whether you run a large corporation or a small business, the annual pre-tax audit process is an indispensable and critical task. Proper preparation can significantly alleviate the pressure enterprises face during audits. OneStart has compiled 3 practical tips to help businesses prepare in their daily operations and handle audits with ease.

 

What is an Audit?

Auditing or assurance service involves collecting evidence and analyzing a company's data to evaluate its financial situation. According to Hong Kong regulations, all registered companies must undergo an audit of their financial reports before annual tax filing. The audit must be conducted by a third-party Hong Kong Certified Public Accountant (CPA) to ensure the fairness of the audit process and the accuracy of the company's financial reports. The auditor will submit the report to the Inland Revenue Department (IRD) upon completion of the audit.

teamwork as diverse members of the team do account and auditing.

 

During the audit process, enterprises need to handle a large volume of documentation, which can significantly burden their operations. By paying attention to the following suggestions, you can alleviate audit pressure and enhance the efficiency of the audit:

1. Regularly Update Accounting Records

  • Bank monthly statements
  • Sales invoices/Service income invoices
  • Purchase invoices (applicable for retail and trading businesses)
  • Stock-in and stock-out records (applicable for retail and trading businesses)
  • Year-end inventory list (applicable for retail and trading businesses)
  • Expense receipts/invoices
  • Payroll records (annual salary statements for each employee)/Monthly
  • autopay authorization forms/Monthly MPF contribution details
  • Lease agreements (for offices/warehouses/factories/shops)

To ensure you can provide high-quality supporting documents to the auditor, you should properly maintain and preserve the above financial records on an ongoing basis. By hiring a professional accountant or using accounting software, you can effectively organize and store financial records. The experienced accounting team at OneStart provides tailored monthly, quarterly, and annual financial reporting services, which can significantly reduce the time required for audits.

 

2. Perform Regular Reconciliations

Reconciliation is a critical task in accounting. By repeatedly checking and comparing account balances with actual situations, you can ensure the completeness and accuracy of accounts, preventing discrepancies and errors in financial statements.

Completing regular reconciliations can help you identify factors that may impact audit assessments, such as suspicious cash flows, so that you can prepare relevant supporting documents to explain them to the auditor in advance.

 

3. Collaborate with Professional Accountants

Even with the help of accounting software, a professional accountant is irreplaceable for the importance of a business. A professional accounting team can not only simplify your accounting tasks but also provide more in-depth account analysis and tax advice, making it easier for your enterprise to handle the audit process and identify opportunities to improve your business and operations. They can also provide professional advice and support if you encounter tax audit investigation, helping you resolve issues more effectively.

Consequences of Late Filing of Profits Tax Returns

Failure to submit Profits Tax returns on time or making incorrect statements without reasonable excuse during the filing process could result in a fine of HK$10,000 and an additional penalty of up to three times the amount of tax undercharged.

The experienced accounting experts at OneStart Business Centre are highly trusted by clients. If you have any questions about accounting and tax filing in Hong Kong, feel free to call 3575 6888 or WhatsApp OneStart business consultants to learn more.

 

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