No one likes the idea of being audited, but understanding how a Canada Revenue Agency (CRA) audit works—and how to prepare for one—can make the process far less stressful.
At Infinity & Beyond Business Inc., we help business owners stay ready year-round so an audit doesn’t catch them off guard. Whether you’ve received a notice or simply want to stay prepared, this guide explains what to expect and how to organize your records for a smooth experience.
What Is a CRA Audit?
A CRA audit is a review of your business records to ensure the information you’ve reported is accurate. This may include checking:
- The income you’ve reported
- Deductions you’ve claimed
- GST/HST returns
- Payroll records
The CRA may contact you for an in-person audit, a mail-in review, or a phone-based inquiry. Audits can be random or triggered by inconsistencies, large claims, or missing information.
What Triggers a CRA Audit?
While audits can happen to anyone, common triggers include:
- Unusual changes in income or expenses
- Repeated losses over multiple years
- High claims for business use of home or vehicle
- Missing information on returns
- Industry-specific benchmarks not being met
- Late or amended filings
What Happens During a CRA Audit?
- Initial Contact: You’ll receive a letter or call informing you of the audit, what years are being reviewed, and what documents are needed.
- Document Submission: You may be asked to send records or prepare for an on-site visit.
- Review Process: The auditor will examine your bookkeeping records, receipts, and other supporting documents.
- Results: You’ll receive a summary with findings. If changes are proposed, you’ll have the opportunity to respond or provide more details.
- Assessment or Reassessment: CRA may issue a new amount owed or a refund, depending on the outcome.
How to Prepare for a CRA Audit
Here’s a detailed checklist to ensure your records are audit-ready:
1. Keep Your Books Up to Date
- Use software like QuickBooks, Xero, or Sage
- Ensure entries are categorized correctly
- Reconcile your bank accounts monthly
2. Retain All Supporting Documents
- Save all receipts, invoices, and bills
- Store digital or hard copies for at least six years
- Include proof of payments (e.g., cleared cheques, credit card statements)
3. Track Business vs. Personal Use
- For home office: document workspace size, usage hours, and related bills
- For vehicles: maintain a logbook of business vs. personal kilometres
- For phones and internet: keep records showing business use percentage
4. Organize GST/HST Records
- Keep copies of returns and supporting documentation
- Retain sales and expense receipts with GST/HST clearly shown
- Reconcile your GST/HST collected vs. remitted regularly
5. Maintain Payroll Documentation
- Keep copies of T4s, remittance forms, and pay stubs
- Record source deductions and submission dates
- Track contractor payments and issue T4A slips if applicable
6. Conduct Regular Reviews
- Review your books quarterly with your accountant
- Flag unusual entries or trends early
- Prepare summaries and working papers for each reporting year
What If You Find Errors?
If you notice a mistake on a past return, it’s best to correct it before an audit. The CRA Voluntary Disclosures Program (VDP) allows you to fix issues without penalties, as long as you come forward before they contact you.
Tips for Working with the CRA Auditor
- Be polite, professional, and cooperative
- Answer only what’s asked—don’t provide unrelated documents
- Respond by deadlines
- If unsure, have your accountant communicate with the auditor directly
How Infinity & Beyond Business Inc. Can Help
Whether you’re going through an audit or want to avoid one, we help business owners:
- Organize and digitize records
- Stay compliant with reporting obligations
- Prepare audit response packages
- Communicate with the CRA on your behalf
If you’re looking for an experienced Accountant in North Vancouver who can help you stay audit-ready and compliant year-round, Infinity & Beyond Business Inc. is here to support you.
A CRA audit doesn’t have to be overwhelming. With proper records and the right team, it becomes a manageable process. The key is staying organized, maintaining good documentation, and having professionals you can trust.
Have questions about CRA audits or need help preparing your records?
Contact Infinity & Beyond Business Inc. today and get support tailored to your business needs.
