Audit Notification

If the CRA has decided to audit you or your business, you will most likely be notified in writing by a ‘Notice of Audit’ or similar correspondence. This document with explain the audit’s purpose and scope. On occasion, the CRA may notify you of an audit by phone, but this is rare and written confirmation will follow.

In the Notice of Audit, you will be informed of:

1. The audit’s scope (e.g. what tax years are in question, the type of audit being conducted etc.)
2. Instructions on what to do next (most often this is a request for documents) and a timeline in which this must be completed
3. Contact information for the assigned CRA auditor

Scope of the Audit

The scope of an audit can vary greatly from case-to-case, and depends on the taxpayer’s profile, fillings, identified risks or ‘red flags and so on. The Notice of Audit will specify the nature of the audit.

If you receive an audit notification, it is important to understand and pinpoint the audit scope., including the year and return in question, who is being audited, and the information being required. It is important to zero-in on the audit scope so that you can identify the exact issues in question, respond quickly and accurately, and provide the exact information sought. If the audit scope is not properly identified problems can arise, such as giving the auditor the wrong information or more information than is required. As a result, the auditor could expand the audit, require more information thereby extending the time-period of the audit, or  make a decision against you where you have to pay more tax. To get help, ask a lawyer now.

Types of Audits:

1. Desk Audit

The most common type of audit is a desk audit. This type of audit is conducted remotely, whereby the CRA will request information and documents from the taxpayer and will make their analyses remotely.

2. Field Audit

A field audit is more comprehensive and includes CRA auditors visiting a taxpayer’s business or physical location to examine records in more detail.

3. Comprehensive Audit

A comprehensive audit can take the form of a desk or field audit, and may cover multiple tax years, multiple types of taxes (income, expenses, GST/HST etc). and so on.

During an audit, the most common things CRA may review include:

1. Reported income
2. Deductions and credits
3. Expenses
4. GST/HST compliance
5. Payroll compliance

The CRA may request:

1. Tax returns
2. Financial statements
3. Bank statements
4. Sales invoices and receipts
5. Purchase records and receipts
6. Payroll records
7. Contracts or other supporting documents

After the Audit

After the CRA has completed their review, it will issue a summary of its findings. This may include reassessments, additional taxes owed, interest, or penalties. If no issues are found, the audit is closed without changes.

Taxpayers can challenge the findings of an audit by filing an objection within 90 days of receiving the notice of reassessment.

Get help

For advice and assistance with tax planning, a CRA tax dispute, or other tax issues, contact KPK Law.

Personal and business tax issues are vast and complicated. To get help, ask a lawyer now.

								
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