โ Field Audits Require Immediate Expert Preparation
The IRD's field audit team is experienced and methodical. Businesses that meet auditors without preparation โ with disorganised records, untrained staff, or without specialist representation โ routinely suffer larger adjustments and higher penalties than necessary. Contact us the moment you receive a field audit notice.
Common Challenges
Records Readiness
Auditors will examine your books systematically. Disorganised, incomplete, or inconsistent records raise red flags and invite deeper scrutiny.
โ Risk: Poor records โ extended audit scope and larger adjustments
Staff Interview Preparation
IRD field auditors often interview directors, accountants, and operational staff. Unprepared answers โ even when truthful โ can create inconsistencies.
โ Risk: Uncoordinated staff statements โ credibility issues in audit
Cash Business Scrutiny
Cash-intensive businesses (restaurants, retailers, salons) face particularly intensive scrutiny. Auditors use mark-up analysis and cash reconciliation to identify unreported income.
โ Risk: Mark-up analysis shortfall โ presumed undeclared income
Property & Asset Review
Auditors may review director assets (properties, vehicles, investments) against declared income to identify lifestyle gaps suggesting undeclared income.
โ Risk: Lifestyle vs income gap โ presumed undisclosed income
Who Is This For?
Businesses notified of field audit
Companies and partnerships who have received an IRD field audit notification letter.
Cash-intensive businesses
Restaurants, retailers, salons, and other cash businesses at higher audit risk.
Offshore income claim holders
Businesses whose offshore income claims are being reviewed by IRD field auditors.
Property traders & developers
Frequent property buyers/sellers whose transactions are being audited.
What We Do
Pre-Audit Records Preparation
Systematically organise and review your records before the audit to ensure they are complete, consistent, and present your tax position clearly.
Records gap analysis and documentation preparation
Staff Briefing & Interview Preparation
Prepare directors and key staff for auditor interviews โ ensuring consistent, accurate responses without over-disclosure.
Role-playing and communication coaching sessions
Audit Attendance & Representation
Our specialist CPAs attend all audit meetings with you, manage auditor questions, and ensure the audit stays focused on legitimate issues.
All audit meetings attended by our senior CPA team
Mark-Up & Cash Flow Analysis
Pre-empt auditor mark-up analysis by preparing your own gross profit reconciliation and cash flow analysis with explanations for any apparent anomalies.
Industry mark-up comparison and cash reconciliation
How It Works
Urgent Consultation
Within 24 hoursImmediate review of the audit notice and planning of audit preparation strategy.
Records Preparation
5-14 daysComprehensive review and organisation of all business records, accounts, and supporting documents.
Audit Support
Duration of auditAttendance at all IRD audit meetings, management of document requests, and ongoing advice.
Settlement
Post-auditNegotiate best possible outcome on any audit adjustments and agree settlement terms.
Case Studies
Restaurant chain โ 5 locations, cash business
- โขIRD mark-up analysis identified HKD 2.8M estimated shortfall
- โขPre-audit records fully organised
- โขMark-up reconciliation prepared with seasonal explanations
- โขFinal adjustment: HKD 420K (vs HKD 2.8M initial)
โWithout their preparation, the mark-up assessment would have been devastating. Exceptional.โ
Retail trader โ electronics, 3 shops
- โขAudit focused on cash purchases and supplier payments
- โขRecords reorganised over 10 days
- โขAll cash transactions reconciled with bank deposits
- โขAudit concluded with minor adjustment of HKD 85K
โTheir preparation was the difference between a minor issue and a major tax bill.โ
Frequently Asked Questions
What typically happens during an IRD field audit visit?
A field audit typically involves: (1) Opening meeting โ auditors explain the scope and request document lists; (2) Records examination โ systematic review of accounting records, bank statements, invoices, and contracts; (3) Enquiry letters โ written questions about specific transactions or discrepancies; (4) Business inspection โ auditors may inspect premises, stock, and operations; (5) Director/staff interviews โ discussions about business operations and transactions; (6) Closing meeting โ discussion of findings. The entire process can take weeks to months.
What is the IRD's gross profit margin (mark-up) test?
For cash-intensive businesses (restaurants, retailers, salons), the IRD computes an expected gross profit margin based on industry standards and your stated cost of sales. If your declared profit margin is significantly below the industry average without satisfactory explanation, the IRD will treat the shortfall as undeclared income. For example, if the restaurant industry average gross margin is 65% but your return shows 50%, the 15% gap is assessed as unreported revenue. Preparing your own mark-up analysis with explanations for any below-average margins is essential.
Can I refuse to provide documents or information to IRD auditors?
Generally no. Under s.51 of the IRO, the IRD has power to require any person to provide documents, information, and accounts relevant to a tax investigation. Refusal to comply without reasonable excuse is an offence. However, legally privileged documents (communications with your solicitor) may be withheld. The key is to provide what is legitimately required โ no more, no less โ guided by specialist advice.
How should I handle an IRD auditor's request to interview my staff?
You can request that staff interviews be conducted in the presence of your CPA or legal adviser. Staff should be briefed to answer questions honestly and accurately โ but should not speculate, guess, or volunteer information beyond the specific question asked. Inconsistent answers between staff members (even if honest misunderstandings) can create credibility issues. Pre-audit coaching sessions ensure staff are prepared without coaching them to give false information.
What documents does the IRD typically request in a field audit?
Typical document requests include: audited accounts and supporting working papers; bank statements (all accounts); sales invoices and purchase invoices; contracts with major customers and suppliers; payroll records and IR56B; lease agreements; directors' loan accounts; travel and entertainment expense details; fixed asset register; and stock records. For offshore income claims: contract evidence, correspondence, and evidence of overseas activities are commonly requested.
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