Accounting & Audit
Accounting & Audit
In Hong Kong, all companies are required to subject their financial statements to a compulsory audit. There are no exemptions to it because of size, turnover or number of staff employed. As a result, we help most of our clients with preparing their accounting books and records, arranging their statutory audits and do the liaising with our auditors.
As a result, because of our support in this field, our clients are in the position to concentrate on their core activities and business growth, without being unnecessarily distracted by work in relation to preparing the financial statements of their companies.
The Importance of an Expert Audit Service
This is, amongst others, true for those newly set-up businesses in Hong Kong when they conduct their first statutory audit during. Often, those businesses are caught by surprise as the list of information to be provided to the auditor may be rather lengthy. The last thing one also want to avoid is being confronted with an audit opinion, such as a ‘qualified opinion’, a ‘disclaimer of opinion’ and an ‘adverse opinion’.
In simple terms, a qualified opinion is one where having carried out all the practicable audit procedures the auditors still express an audit opinion on the overall true and fair view as presented in the financial statements, whereas with a disclaimer of opinion the auditors simply do not express an audit opinion on the overall true and fair view as presented in the financial statements. An adverse opinion thereinafter is one where having carried out all the practicable audit procedures the auditors are of the opinion that the financial statements do not give an overall true and fair view.
The problem with opinions is that this may raise questions from the relevant tax authorities, questions one would rather like to avoid and that is the reason why qualified opinions can best be avoided at all times.
For example, one of our clients who did not initially engage us for accounting services, was about to receive from its auditor a ‘disclaimer of opinion’ in relation to its financial statements. This, due to fact that the company did not provide enough supporting documents for its past transactions. The client got in touch with us on this matter and due to our extensive experience in handling auditor’s enquiries, we managed to satisfy all the auditor’s requests resulting into the issue of an unqualified opinion, i.e. a clean report in respect of the financial accounts of this client company.
Proper Accounting & Taxation Risk
On another occasion, an existing client that also had engaged us for accounting services, was confronted by our auditor with the question whether certain transactions could be considered as so-called related party transactions. In this particular case, our client had set-up a foundation/trust structure in order to hold some of its assets.
As we understood our client’s structure well and are familiar with the legal concept of trust and foundation, we were in a good position to explain to the auditor the proper legal relationship of the “related” parties involved. Eventually, after clarifying the issue with the auditor and providing him with all the relevant documentary evidence, the auditor concurred with our view that such transactions should not be considered and disclosed as related party transactions.
Therefore, it is very important to make sure that the accounting work is done properly and professionally on a daily basis in order to avoid any unnecessary opinions on the accounts from the auditor in the near future.
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