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An Audit Procedure maps out the specific steps auditors take to verify financial records and business operations. In Hong Kong, these procedures follow standards set by the Hong Kong Institute of Certified Public Accountants (HKICPA) and must align with Hong Kong Standards on Auditing (HKSAs).

These procedures help auditors gather reliable evidence, spot irregularities, and ensure compliance with local regulations. They typically include checking source documents, confirming account balances, reviewing internal controls, and testing transaction samples. Good audit procedures protect both the company and its stakeholders by maintaining transparency and accuracy in financial reporting.

Use Audit Procedures whenever your organization needs to verify financial accuracy or operational compliance. This is especially crucial during annual financial audits, mergers and acquisitions, or when Hong Kong regulators like the Securities and Futures Commission (SFC) request reviews.

Companies also rely on Audit Procedures when expanding operations, implementing new accounting systems, or responding to suspected irregularities. They're essential for listed companies meeting HKEX requirements, organizations seeking investment funding, and businesses managing risk in high-value transactions. Regular use of these procedures helps catch issues early and maintains strong internal controls.

• Substantive Audit Procedures: Verify account balances and transactions directly through sampling, confirmations, and detailed testing
• Control Testing Procedures: Evaluate internal control systems and risk management frameworks
• Analytical Procedures: Compare financial ratios, trends, and industry benchmarks to spot anomalies
• Compliance Audit Procedures: Focus on adherence to Hong Kong regulations, HKEX listing rules, and industry standards
• IT Audit Procedures: Examine digital systems, data integrity, and cybersecurity controls

• External Auditors: Create and execute Audit Procedures while conducting independent audits for Hong Kong companies
• Internal Audit Teams: Develop ongoing procedures for monitoring internal controls and operational efficiency
• Company Management: Reviews and approves procedures, provides necessary documentation, and implements recommendations
• Audit Committee Members: Oversee the audit process and ensure procedures meet HKICPA standards
• Regulatory Bodies: Use these procedures when conducting investigations or compliance reviews of Hong Kong businesses

• Scope Definition: Clearly outline the audit's objectives, timeline, and departments involved
• Risk Assessment: Document key business risks, control weaknesses, and compliance requirements under Hong Kong standards
• Resource Planning: Identify needed personnel, tools, and access rights for conducting the audit
• Documentation Review: Gather relevant financial records, operational manuals, and previous audit reports
• Testing Methods: Select appropriate sampling techniques and analytical procedures aligned with HKICPA guidelines
• Quality Controls: Establish review points and documentation standards to ensure consistent execution

• Objective Statement: Clear definition of audit scope, purpose, and expected outcomes
• Methodology Section: Detailed testing procedures aligned with Hong Kong Standards on Auditing
• Risk Assessment: Identification of key risk areas and control points to be examined
• Documentation Requirements: Specific records, evidence, and working papers needed
• Compliance Framework: References to relevant HKICPA standards and regulatory requirements
• Quality Control Measures: Review processes and sign-off procedures for each audit step
• Reporting Guidelines: Format and content requirements for audit findings and recommendations

An Audit Procedure differs significantly from a Compliance Procedure in several key aspects, though both play crucial roles in Hong Kong's regulatory framework. While Audit Procedures focus on examining and verifying financial records and operations, Compliance Procedures establish ongoing rules for maintaining regulatory requirements.

• Purpose and Scope: Audit Procedures are specific testing methodologies for verifying accuracy and control effectiveness, while Compliance Procedures set continuous standards for day-to-day regulatory adherence
• Timing and Duration: Audit Procedures are typically executed at specific points in time, while Compliance Procedures provide ongoing guidance throughout the year
• Implementation Focus: Audit Procedures emphasize evidence gathering and verification, whereas Compliance Procedures focus on preventive measures and regular monitoring
• Output Format: Audit Procedures result in findings and recommendations, while Compliance Procedures establish standing policies and guidelines