What Happens in a CRA Business Audit—and How Should You Prepare?

CRA explains that a business audit closely examines books and records to determine whether filed returns are supported, the appropriate tax was paid, and the business received amounts to which it was entitled. Selection does not by itself prove wrongdoing. The audit may focus on specific issues or cover broader parts of income tax, GST/HST, or payroll reporting. The opening letter or contact should identify the auditor, periods, program, and initial information request.

Protect the business from impersonation. Verify unexpected contact using official CRA guidance and account information, not a phone number supplied only in a suspicious message. Once verified, note response dates and ask the assigned auditor for clarification when an item is unclear. CRA’s official Audit Enquiries feature can allow a business with a case number to submit questions and review answers through My Business Account. Secure, documented communication is preferable to sending sensitive files casually.

CRA’s business-audit page lists ledgers, journals, invoices, receipts, contracts, and bank statements among the records an auditor may examine. Depending on relevance, the auditor may also request personal records of owners and records involving related individuals or entities. CRA may ask for information from the accountant, bookkeeper, or employees. The scope should be understood, but a business should not assume that an account called “personal” can never be relevant where company and owner transactions overlap.

Begin by preserving all records for the period. Gather filed returns, assessments, working papers, trial balances, general-ledger details, financial statements, bank and card statements, sales reports, expense support, payroll records, contracts, and relevant correspondence. Map every requested item to a source and identify gaps honestly. If information is held by a former provider or cloud platform, request a complete export early. Do not reconstruct documents to look original or delete material after receiving an audit request.

Appoint one informed contact and coordinate with the company’s accountant or tax adviser. Read the request line by line, confirm the deadline, organize files in the same order, and use a response index. Reconcile totals to the filed returns and explain legitimate differences clearly. Keep a duplicate of everything submitted, the delivery confirmation, questions asked, meetings held, and answers provided. If the deadline is not realistic, discuss it promptly rather than going silent.

During the audit, answer truthfully and directly. Ask for written clarification where needed and separate facts from assumptions. At the end, review proposed adjustments and the supporting calculation before responding. CRA publishes a Taxpayer Bill of Rights and formal processes for disputes, but the appropriate step depends on what has been issued and the applicable time limit. Professional advice is especially important when amounts are material, records are incomplete, owner transactions are involved, or a reassessment may affect other periods. Calm organization is the best first response.