Finding the right auditing firm can seem daunting when you are a new business owner. With such a large market and such a large range of fees, it can be difficult to feel like you’re making the right decision about who to go with. In this article, we’ll go over why there is such a large range of auditing fees, and questions you should ask yourself and any prospective auditors to filter them down to the ones that meet your company’s needs.
Contributing Factors of Audit Fees
Audit fees are determined by a myriad of contributing factors that can create a very wide range of fees. We’ve broken down those factors into the following categories for simplicity:
Company Size & Complexity
The size and complexity of your company will affect your audit fees. For example, a large company with a complex corporate structure will demand a higher audit fee. This is especially true if consolidation is involved.
In contrast, smaller companies in Hong Kong that qualify for the SME-FRS, which is a simple reporting framework for SMEs, will have much lower audit fees.
Industry
Certain industries will command higher audit fees due to the complexity of their nature or the scale of their operations. Licensed corporations, financial services, regulated companies such as insurance companies, have additional compliance and reporting standards that further complicate their auditing process.
To make it as easy as possible to estimate a reasonable audit fee range for our clients, we categorize the fee ranges by business nature and scale. For simplicity, the following examples are based only on SMEs, because as companies become larger and more complex, a lot more information is needed to estimate a reasonable audit fee. Keep in mind that these are only estimates, and should not be used for actual quotation:
| Business Nature | Number of Properties | Estimated Audit fee range |
| Property Investment | 1 | HK$5,000 to HK$6,000 |
| Property Investment | 2 to 4 | HK$7,000 to HK$10,000 |
| Property Investment | 5 or more | Starting from HK$12,000 |
| Business Nature | Number of Transactions | Estimated Audit fee range |
| Service company | Less than 100 per year | HK$5,000 to HK$6,000 |
| Service company | 100 to 300 per year | HK$6,000 to HK$8,000 |
| Service company | 300 to 600 per year | HK$8,000 to HK$11,000 |
| Service company | 600 or more | Starting from HK$11,000 |
| Business Nature | Number of Transactions | Estimated Audit fee range |
| Trading company | Less than 100 per year | HK$6,000 to HK$7,000 |
| Trading company | 100 to 300 per year | HK$7,000 to HK$9,000 |
| Trading company | 300 to 600 per year | HK$8,000 to HK$11,000 |
| Trading company | 600 or more | Starting from HK$11,000 |
| Business Nature | Estimated audit fee |
| Subsidiary holding company with no business operations | HK$6,000 |
| Business Nature | Estimated audit fee |
| TVP Audits, BUD Fund Audits, and other government funds | HK$3,000 |
Time Spent
Auditors charge by the hour, so the more time they need to spend on auditing, usually because of poor record keeping by the client, the higher the fees will become.
Prior Auditor’s Opinion
If previous audits have resulted in a modified opinion, the auditors will need to dedicate more resources to scrutinize the areas that led to the previous opinion.
The Audit Firm’s Size & Reputation
Audit fees for the same company can vary depending on the audit firm performing the audit. A larger and more reputable firm will charge higher fees, while smaller locally-based firms may only charge a fraction of the cost of the more reputable firms. Choosing the right firm will depend on what your company’s needs are.
The market for auditors and CPAs in Hong Kong can be broken down into four types of service providers:
- Big4 Accountants – Usually serves large publicly-listed clients.
- 2nd Tier Accountants – Usually serves large publicly-listed clients.
- Small-to-Medium Practitioners – Serves smaller SMEs that have some level of complexity.
- Tech Startup Accountants – Serves cookie-cutter dormant companies or simple businesses with very few transactions.
Questions to ask your accountant about their auditing service
- Will you outsource any of your auditing services you provide to my company?
- Do you have any other clients or experience with providing auditing services to companies in my industry?
- Will I have access to a designated CPA dedicated to my company that can answer my concerns?
- Will my main point of contact be an accountant or a sales/account manager?
- Which accounting software does the auditor specialize in?
- Do you have any experience with offshore profits claims?
Conclusion
A lot of factors go into calculating your audit fees, from the profile of your company to the profile of auditing firms themselves, which makes it tricky to get an accurate quotation. You also have a number of other service factors uncorrelated with price to consider when choosing your auditor that will make your experience easier or more difficult.
If you need help selecting an auditor, or would like to see how we could do your audit, talk to us!
