At present, many domestic entrepreneurs will set up Hong Kong companies in Hong Kong, and then invest and hold domestic entity subsidiaries. This structure arrangement is designed to facilitate access to international funds overseas to support the development of domestic main businesses.

According to the Hong Kong tax law, every Hong Kong company must be audited and issued by a Hong Kong certified public accountant every yearHong Kong auditReport, audit report together with the completed profits tax return submitted to the Hong Kong Inland Revenue Department to complete the tax return. When a Hong Kong company holds a majority stake in its domestic subsidiary, the parent company in Hong Kong needs to combine the financial data of its domestic subsidiary in the audit process. In the combined audit process, Hong Kong accountants generally only require the audit report of the domestic subsidiary, rather than the working papers of the domestic certified public accountant. Recently, a client in Shanghai encountered such a situation. When they commissioned the Hong Kong certified public accountant to do the merger audit, they were required to provide the audit papers of their domestic subsidiaries. However, the domestic accountant said that the audit papers were internal archived materials of the accounting firm and could not be provided externally. As a result, the client cannot meet the requirements of the Hong Kong accountant for the audit data, and the Hong Kong accountant has to issue a reservation opinion on this in the audit report. The audit report of the reserved opinion may have adverse effects on the handling of banking business, project bidding and other business, and may even lead to the business cannot be handled.

The professional accountants of Lianze believe that the audit report of the subsidiary signed by the domestic auditors can support the Hong Kong accountants to make accurate professional judgment in the merger audit of the parent company in Hong Kong. Therefore, they will not issue reservations on the merger audit report. The problem is solved.

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