What can you expect when your business is audited?
In most cases, the audit will take place on site at your business. In certain rare situations, the audit may be classified as an “office audit” and will be conducted at a CRA office. Office audits are usually limited to one or two items. In some cases, office audits can lead to a more comprehensive audit, depending on what the CRA finds. Therefore, it is important to take office audits seriously to prevent the scope of these audits from increasing.
At the outset of a business audit, the auditor will show you their identification card, give you their contact information, and explain the scope of the audit. They will also identify the tax years or reporting periods that will be audited as well as the documents and information the CRA wants you to provide.
It is important to be informed and ask for clarification from the auditor where needed. Before the auditor begins the audit, make sure you know exactly what they are auditing and why. It is also good to get the contact details for the auditor's supervisor should you need to involve them at a later time. You should also provide only the documents they need and nothing more. Under no circumstance can an auditor request you to prepare a document that does not exist. If during the course of the audit the auditor asks for documents that weren't originally requested, you should ask why they want to see them. Understand your rights as a taxpayer and don't be afraid to assert yourself where appropriate. For example, if an auditor's request would require an extensive amount of time to compile the requested documents, you can address this concern with the auditor. The CRA has committed to take into account the cost of compliance when administering tax legislation.
Before beginning the audit, the auditor will likely take the opportunity to first explain the audit process, learn about your business, tour your business premises, and ask to see your books and records.
Worried? Don't be. Your BDO advisor will be with you every step of the way. The earlier you notify us of the CRA's request for an audit, the better equipped we can be to help. In addition, talking to us before providing the CRA with any records or answering any questions will also better position us to help you prepare for the audit process. BDO also has a Tax Controversy and Dispute Resolution Team that can assist, particularly if the audit becomes difficult.
What is the CRA auditor allowed to examine?
In a nutshell, a lot and likely more than you would expect. As a business owner, you may be surprised to learn that your personal records and the personal or business records of other individuals or entities are legally considered to be part of the items that relate, or may relate, to the business being audited. This means that an auditor can examine the records of you and your family members as part of your business' audit.