Differences Between Corporate Accounting and Statutory Audit: What You Should Know
Accounting and auditing are mandatory processes for businesses all around the world. If you have a business in Hong Kong, it is important to understand the audit laws and regulations early on. Therefore, you must choose a reliable accounting service company that can help you with auditing advice.
Here, we will learn the difference between corporate accounting and statutory audit for businesses in Hong Kong.
In Hong Kong, corporate accounting is mandatory for all companies. The directors of the must prepare financial statements every year. This is monitored by the Companies Ordinance (CO) and the Inland Revenue Ordinance (IRO). Likewise, the Hong Kong Institute of Certified Public Accountants (HKICPA) monitors the accounting standards followed in the process.
According to section 51 of the IRO, the company must keep business records for not less than 7 years. The business records include:
- Books of account (electronic or paper) containing receipts and payments, or income and expenditure. These records may need to be verified with the help of vouchers, bank statements, receipts, and other supporting documents.
- If there is any business transaction carried out by any person, the records must include:
- A record of all the assets and liabilities of a person in that business.
- A record of daily inflow and outflow of money in that business.
- If the transactions include the trade of goods:
- Record of all goods sold and purchased showing the goods and the parties involved.
- Statements of trading stocks held by the person.
- When the business involves the provision of services, you must store the records of provided services.
Statutory Audit is also a mandatory audit for companies based in Hong Kong. For a new company, it may appoint an auditor before its first Annual General Meeting. For larger multinationals and public companies, there must be a thorough report prepared by the directors of the company.
To carry out the statutory audit, the company must appoint an independent auditor who is deemed eligible by the HKICPA. Likewise, the auditor must present the audited financial records to company shareholders. Similarly, he must report if the financial statements of the company portray a true view of the company’s status.
For statutory audit, the company must present the annual financial statements. This includes records such as income statements and balance sheets. Likewise, they must be supported by bank statements, contracts, invoices, and receipts.
Hence, we have now learned how corporate accounting and statutory audit is carried out and how they differ in some aspects. Despite their differences, they are important for taxation and attaining loans and investments.
A proper audit of the company’s financial statements is a prerequisite for processing tax. The Inland Revenue Department requires the company to present the profit tax return with the audit report.
Similarly, the audit report defines the position of the company while applying for loans and investments.
How Can We Help?
From this blog, we have learned the difference between corporate accounting and statutory audit. Likewise, we have also learned why corporate accounting and statutory audit are important for taxation and seeking investments.
3E Accounting is a top-quality Hong Kong accounting service provider that you can trust for reliability and guaranteed satisfaction. Our unparalleled expertise and decades of experience allow us to design a tailored service according to your business needs. Since accounting and auditing is a critical part of any business, you must choose the right service partner like 3E Accounting.
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