All Hong Kong-registered companies (except for dormant ones) are legally required to have their financial statements audited each year. 

The audit ensures that a company’s finances are accurate, comply with Hong Kong’s financial reporting standards, and present a true picture of the company’s financial position.

At the end of an audit, the external auditor issues an audit opinion, which reflects whether the financial statements are reliable. Understanding this opinion is crucial for running your business.

An audit opinion is a formal statement issued by an auditor after reviewing a company's financial statements. It indicates whether the company’s records fairly represent its financial position in accordance with Hong Kong's accounting standards.

There are four types of audit opinions:

1. Unmodified (Clean) Opinion – Everything checks out.

2. Qualified Opinion – Mostly accurate, but with some concerns.

3. Disclaimer of Opinion – Insufficient information to form an opinion.

4. Adverse Opinion – Major misstatements or misrepresentations.

Let’s break them down.

This is the best-case scenario. An unmodified opinion means the financial statements are accurate, complete, and comply with Hong Kong’s reporting standards.

You’ll typically see phrases like:

• “The financial statements give a true and fair view of the company’s affairs.”

• “Prepared in accordance with the Hong Kong Small and Medium-sized Entity Financial Reporting Standard (SME-FRS).”

Why is a Clean Opinion important?

A clean audit opinion boosts confidence among investors, banks, and tax authorities. It shows that the company maintains transparent and compliant financial records, making it easier to:

• Secure loans and funding.

• Gain investor trust.

• Minimize tax scrutiny from the Inland Revenue Department (IRD).

A qualified opinion is issued when an auditor finds some issues with the financial statements—but not serious enough to deem them unreliable.

You’ll typically see phrases like:

• “Except for [specific issue], the financial statements present a true and fair view.”

What triggers a Qualified Opinion?

• Missing financial data that wasn’t provided during the audit.

• Non-compliance with accounting standards in specific areas.

• Limited access to certain financial records.

While a qualified opinion isn't ideal, it’s not necessarily a red flag. Most banks, investors, and tax authorities will still accept a company’s financials as long as the concerns are minor and well-explained.

A disclaimer of opinion means the auditor was unable to complete the audit due to insufficient information. Essentially, the auditor does not express an opinion on the financial statements.

What can cause a Disclaimer of Opinion?

• The company restricted the auditor’s access to key financial records.

• Significant gaps in accounting records make an audit impossible.

• Major uncertainties prevent a clear financial assessment.

This is a serious issue, as it signals a lack of transparency. It can lead to:

• Banking difficulties (loans may be denied).

• Investor concerns (loss of trust).

• Stronger tax scrutiny from the IRD.

As a result, the auditor will state that they “do not express an opinion” on the financial statements.

An adverse opinion is the most serious type of audit opinion. It means the company’s financial statements contain material misstatements or inaccuracies that misrepresent its financial position.

Why would a company receive an Adverse Opinion?

• Intentional misrepresentation of financial data.

• Major accounting errors that distort the company’s financial health.

• Failure to comply with Hong Kong Accounting Standards.

An adverse opinion suggests the company’s financials cannot be trusted, which can lead to:

• Severe tax investigations.

• Loss of investor confidence.

• Difficulty in securing funding or partnerships.

If your company receives an adverse opinion, it’s crucial to take corrective action immediately to avoid further legal and financial repercussions.

Understanding your audit opinion is essential for maintaining financial credibility and compliance in Hong Kong.

Whether your business aims for a clean opinion or needs help addressing audit concerns, working with the right professionals can make all the difference.

At blynq, we help businesses stay audit-ready, ensuring their financial statements meet all regulatory requirements.

Need expert guidance for your audit and accounting needs? Reach out to us today—we’re here to make your audit process smooth and hassle-free.