Audits in Hong Kong: How to Choose the Right Auditor
According to the Companies Ordinance, all companies in Hong Kong are required to conduct yearly audits by a Certified Public Accountant (CPA), regardless of size and turnover.
The requirement applies to small and medium enterprises (SMEs) as well; however, eligible SMEs can choose to adopt the SME Financial Reporting Standard (SME-FRS) for a more streamlined audit process.
To ensure your company is not delayed in the audit process and to avoid disruptions to your workflow, we advise choosing an auditor ahead of time. This article will guide you in selecting the best auditor for your business in Hong Kong based on your unique situation.
Types of Accounting Firms
Your first and most crucial decision is to choose the type of accounting firm you want to engage in for your audit. Before we discuss key considerations, let's review what options you have for an audit in Hong Kong.
The Big Four
The "Big Four" is a common nickname used to refer to the four largest accounting firms in the world.
Deloitte: Deloitte has been active in China for over a hundred years and has a staff of 20,000 across 31 cities.
KPMG: KPMG China has been active since 1984 and today has over 15,000 partners and staff across 31 cities.
EY: EY's first Hong Kong branch opened in 1968. It now has over 23,000 professionals in the Greater China Region.
PwC: PwC became active in China and Hong Kong in 1946 and today has over 23,000 partners and staff in China and Hong Kong.
While there are some differences in how these four firms operate and conduct audits, the overall experience tends to be very similar, regardless of your choice.
Mid-Tier
The primary advantage of mid-tier firms over the Big Four is lower costs. Opting for a less prestigious auditor could save a significant amount of money without any significant sacrifices. Examples of mid-tier accounting firms include:
By opting for a mid-tier auditor, you can expect a more personalized and thorough service.
However, keep in mind that mid-tier firms also have some disadvantages, such as lower staff numbers, longer turnaround times, and potential geographic limitations in the case of international operations.
Local Mid-Tier
Mid-tier companies based in Hong Kong are an excellent alternative to global mid-tier accounting firms.
Although local mid-tier firms might lack international reach, they are familiar with Hong Kong legislation and can ensure your company is compliant.
Lawrence Cheung C.P.A. is a good example of a local mid-tier accounting firm.
Boutique
Boutique Hong Kong-based accounting firms are even smaller than local mid-tier. While they can only take on a limited number of clients, they can provide a personalized yet economical audit to fulfil your legal obligations.
Should you seek assistance with your annual audit or any other financial or tax-related services in Hong Kong, our partners at APS Management have you covered. APS Management offers a range of cost-effective plans tailored to meet your specific needs.
How to Choose a Fitting Auditor for Your Business Needs
To choose the best auditor for your Hong Kong business, you have to examine a few essential factors.
If your company is listed overseas, consider engaging the same auditor for your Hong Kong subsidiary as your head office, which usually means one of the Big Four.
While it's not a legal requirement in Hong Kong to engage the same auditor, you must be mindful of the accounting firm's policies and also adhere to the legislation of the country where the head office is located.
If your company is listed in Hong Kong — or if it is a large private firm with institutional investors — an international or local mid-tier firm is likely the best option for your audit.
Mid-tier firms generally have a good reputation and conduct thorough audits while keeping the prices lower than the Big Four.
If your operations in Hong Kong are relatively small, or if you run a purely local company that does not seek funding from institutional investors, opt for a smaller boutique firm. Small firms compete on price, offering budget-friendly audits to fulfil your legal obligations.
Please be advised that if you decide to collaborate with a small firm, we suggest relying on recommendations. Certain firms may be understaffed, potentially leading to delayed responses and communication challenges.
Do you have an upcoming audit?
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