CRA Access to Working Papers
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the CRA will try to collect information from the most direct source and in the least intrusive manner possible. |
For a number of years, the Canada Revenue Agency (CRA) and the Canadian Institute of Chartered Accountants (CICA) have had extensive and ongoing discussions on the issue of whether the CRA should be allowed to access third-party accountant and auditor working papers as part of a CRA audit. When this discussion began, the CICA obtained the views of its members through a survey it commissioned. The feedback from CAs was that auditors’ and accountants’ working papers are critical to the integrity of the financial statement, audit/review, and corporate governance processes as a whole. If the CRA regularly sought access to auditors’ and accountants’ working papers, such a policy change could undermine the preparation of documents required to support financial reporting and inhibit the essential frank and open discussions between an auditor/accountant, the audit committee, and management.
Although the CICA was not successful in achieving its goal of restricting access to working papers through a form of privilege, it was able to secure some concessions from the CRA as part of a CRA policy statement dated May 31, 2010. The following are some key elements of the CRA policy set out in the policy statement:
- The CRA states that with the exception of privileged communications, it has the authority to examine not only the records and documents of the subject person under review, but also any other person’s records and documents that may relate to the subject person’s tax liability. Current tax legislation does back up this view.
- The policy statement includes several extremely important overrides to point 1.
- Tax compliance disputes should be resolved primarily between the CRA and the taxpayer, and therefore the CRA will try to collect information from the most direct source and in the least intrusive manner possible.
- Information from third parties will be sought when the taxpayer cannot or will not provide information.
- Access to tax accrual working papers and auditors’ or accountants’ working papers may be required occasionally, but not routinely.
- The CRA believes that a more effective and efficient relationship with taxpayers and their advisers can be achieved by grounding its actions on an understanding of the taxpayer’s business and by applying the key principles of transparency, impartiality, proportionality, and responsiveness.
Based on these statements by the CRA, we believe that this means that until all other avenues to obtain the relevant information have been exhausted, taxpayers should not expect to routinely see requests for tax accrual working papers in particular, and auditors and third-party accountants should not expect to routinely receive requests for their working papers. Furthermore, the approach outlined in the policy statement suggests that requests for information from third parties should not occur at the commencement of a CRA audit.
In summary, the revised policy should mean that the CRA will only request auditor and accountant working papers in exceptional circumstances and not routinely. BDO, along with the CICA, will be monitoring this issue and will confer with the CRA if need be. If you have any questions or require more information, please contact your BDO advisor.
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