Keeping Your Small Business Audit Cost Affordable

Got your Hong Kong company setup and wondering how to keep costs low for a smooth and affordable audit?

Of course this topic of a company audit isn’t the most fun topic – but let’s keep it as simple as possible! And please ask questions to see if we can help others out too.

So there are different ideas people think of when they hear audit. In USA, you’re not required to have your books audited when you file, but later if the tax department asks then they will do an audit.

In Hong Kong, it’s not the government who does this audit when you’re filing, but instead a Hong Kong licensed CPA who does. They have passed the examinations and done all the necessary actions to get their CPA inside HK and can process the audit.

They will check over all your transactions, your financial statements, and prepare an auditor’s report. This is their “stamp of approval” that what they inspected and audited is true and correct.

You then submit that to the Hong Kong IRD (Internal Revenue Department) along with the Profit Tax Return and state how much tax you are going to pay.

Is your total revenue under 2 million HKD? 9999 If so, then you can save money.

While of course I’d prefer to work with you with our bookkeeping service, but if you’re a small business without a lot of transactions or complicated things to file, then you’re best off doing it internally.

Use an online accounting software and try to do it weekly. Having everything ready to go when you work with your CPA will make things smooth and less back and forth.

When you ask a CPA to do the audit, they will ask you for your financial statements. Back in the old days, this used to be a stack of papers, or locally installed accounting software in the company’s office. So it was hard to have more than 1 CPA review it and give a quotation.

So in the old days, once you found a CPA you thought would do a good job, once they saw the books it was hard for you to shop around different prices.

But in today’s digital world, things are changing. You can email your financials to a CPA and get a quotation from them. Though I do have to warn you, many are not the best at keeping up with email, so you may have to meet them in person or call them on their office line a few times to get through.

Showing the auditor (CPA) that you have documents to back up your financial statements will give them less worry. It will also make them confident that what you gave them is complete and filed correctly.

Why do they care if you kept your supporting documents? Remember at the beginning of this guide, I mentioned they have a license from the HK tax bureau? This license means they have to be responsible to upkeep the rules of the HK IRD. They are balancing working with you as a client while also making sure they keep their license.

If they file an audit and later it comes out there was a lot of issues and mistakes, they are also going to be questioned. Why didn’t they verify the transactions were true? Did they really understand the business model clearly for the client? This kind of scrutiny will come up from the license issuer and will be noted on their file.

No HK CPA wants to risk their license for a client! Even if you’re a massive client, they are afraid to become a Anderson Consulting auditor for Enron. Losing their license will not allow them to practice as a licensed Hong Kong auditor, and will hurt their professional career.

Hong Kong isn’t that big of a place, word gets out.

So keep this in mind when you’re complaining why the CPA is asking for all this documentation. Even if they don’t ask, if you are confident and explain to them that you keep everything clear and balanced, they will treat you as a lower risk.

Being accessible is also key. Try to find out which communication channel your CPA likes to use? A lot of people who have Hong Kong businesses schedule a few days a year to visit Hong Kong and work with their CPA. They want to get to know them and make sure that they understand their business model.

If you’re not able to make it to Hong Kong once a year, then try your best to find a CPA who is “e-ready”. When you are choosing a firm, ask them if they can work with Dropbox, online accounting software such as Quickbooks, Xero, or others.

Just like dating or finding a business partner, getting a good CPA on the ground in Hong Kong is critical to your long term business success.

Now for our pitch. We offer a full service offering of Hong Kong business assistance. We have CPAs in our network who can help you with your audit.

If you’re a small business and still getting things off the ground on your first year, we understand your needs! Contact us for a proposal and after we understand your situation we can do our best to make a fair price for your audit.

We are built to work online, we can securely hold your documents and work with all online based accounting software – Quickbooks (We’re a Pro Advisor), Xero, and Waveapp.

So now it’s your turn. What have you been doing for your HK company audits? We’d love to hear how you handle everything.

Or any questions or concerns? Let’s use the comment section below to keep the conversation going!