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In Case You Are Being Audited

January 7, 2011

Well you made it… Your taxes have been filed on time. It looks good. BUT that was a while ago and you have just received a call or notice from the CRA that you are being audited. You may be worried and uncertain about what to expect.

 First, it is part of the mandate of the Canada Revenue Agency (CRA) to selectively audit tax returns and claims for rebates. The objective is to ensure fairness and integrity as part of the checks and balances of our self-assessment tax system in Canada. The goal is to make sure that taxpayers either receive what they are entitled to or pay what is owed.
So, let those uneasy feelings subside for the moment and understand that this audit may have much more to do with your  industry, profession or other criteria than with your particular tax filing.
Knowing what to expect and what to do will go a long way to preparing you for the next steps.

What Should You Expect In Case You Are Being Audited?

In preparation, the auditor should provide:

• general information regarding the scope of the audit (related to the regulations administered by the CRA)

• the years that are subject to the audit

an estimate as to the how much time the audit may take

• information that you will be required to provide for the audit

The auditor should inform you of your rights and obligations and respond to any questions you may have.

Your Obligations

• maintain adequate books and records to determine your tax obligations and your entitlements

• keep books and records for a minimum of six years

• if you use a computer for your accounting, books and records, keep them in an electronically readable format, even if they are also kept on paper

Having good records will smooth out the audit process and generally reduce the time required for the audit. But the time to establish good record keeping is well before the audit.

Information You Must Provide

While you may use the services of tax professionals, you are not relieved of the responsibilities and obligations outlined above or the requirement to present the kinds of information summarized below.
Be ready to make available the following kinds of information:

• your books and records (both paper and electronic)

• supporting documents, and explanations to the auditors questions (given the scope of the audit and the requirements outlined by the auditor when you were notified)

• invoices to back up expenses and revenue

• Director’s minutes etc.

To Move Towards a Successful Conclusion

• Make every effort to establish a positive, courteous and cooperative business relationship with the auditor

• Be as open as reasonably possible but direct any concerns you may have, as issues arise, to an accounting professional with audit support experience

• Ask questions prior to the start of the audit to ensure you know what information you will be required to provide

• Least possible privilege, a well known and commonly accepted principle, says the auditor should have access to the information they require to complete the audit and nothing more. They should have informed, you prior to the start of the audit, of the information they would require. This is not a fishing trip

• Have the auditor address any additional requests for information directly to yourself or someone you designate

• If the auditor needs to take your books offsite, ensure you get a detailed receipt for any borrowed documents. Again, it would be good to consult with your audit support accounting professional

• Provide a specific location for the auditor to conduct their work – don’t provide free reign to them to browse your business. Your audit support accounting service provider may be able to provide office space and administration service to accommodate the auditor throughout the period of the audit, freeing you and your people to carry on with important day-to-day business

• If the auditor raises issues during the audit, first seek a clear understanding of the question and then consult your accounting service provider to guidance
Aylett Grant Tax has extensive audit support expertise and can be a tremendous help in answering the auditors question, helping you to understand issues as they arise, and in developing a workable solutions to problems and settling disagreements at the audit stage.

Adjustment Proposals

The auditor may propose and explain the rationale for adjustments to your. A reasonable amount of time (usually 30 days) will generally be given to you to respond to adjustment proposals with your explanations.

Your questions about the findings and the explanations you offered will be considered and responded to by the auditor. If issues remain unresolved, there are escalations and avenues to pursue before a final decision are made, however, the best time to have addressed these issues was prior to the adjustment proposal. This is not a path to walk alone.

Notice of Assessment and Notice of Reassessment

If CRA adjusts your return, the auditor will arrange to have a notice of assessment or notice of reassessment mailed to you. If the adjustment results in an increase in the amount of your refund, a payment may accompany the notice.

AG Tax LLP Can Help

If you have any tax-related queries or need assistance with tax planning or filing please contact AG Tax. Our tax professionals are highly-experienced with US and Canadian tax laws and can provide you the right guidance to handle your tax situation.

Aylett Grant Tax LLP is a full service accounting firm with a dedicated team of experts, who are highly-qualified and experienced in handling situations related to US, Canadian, and other international tax laws. We can assist with:

  • Canadian Personal and Corporate tax returns
  • Cross Border Taxation and Business Planning
  • US Personal and Corporate Taxation
  • Disclosure of Foreign Assets and other information filings
  • Retirement planning
  • Estate Planning, Inheritance tax advice

To obtain a quote or to arrange for a consultation to discuss your tax related queries, please contact us at:

  • 416-238-5920 (Greater Toronto Area, ON)
  • 604-538-8735 (Greater Vancouver Area, BC)
  • 780-702-2732 (Greater Edmonton Area, AB)


Disclaimer: The information in this publication is accurate as of the time of its publication. AG Tax assumes no responsibility for changes to tax legislation subsequent to the publication of this document. The information provided is for general information purposes only and should not be acted upon without seeking professional advice. If you would like to engage our services, please contact our staff and obtain authorization to send our firm confidential information. A client relationship is not created by the transmission of information. A client relationship is only formed with our firm when a scope and engagement letter signed by the firm and the potential client detailing the terms of engagement is present.

ABOUTAylett Grant Tax, LLP
With offices across Canada, we are positioned to manage and process the full scope of your Canadian, US and US Canada cross-border tax filing needs.
12752 28th Ave, Surrey, BC, V4A 2P4
104–4220 98 St NW Edmonton AB, T6E 6A1
With offices across Canada, we are positioned to manage and process the full scope of your Canadian, US and US Canada cross-border tax filing needs.
12752 28th Ave, Surrey, BC, V4A 2P4
104–4220 98 St NW Edmonton AB, T6E 6A1

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