A tax audit is a process that the Canada Revenue Agency performs on selected businesses to make sure that the information they submit at tax time is accurate and in compliance with the Income Tax Act in Canada.
The audit usually takes place at the office of the business being audited. During the process, the auditor reviews the financial records of the business. These records may include bank records, contracts, ledgers, invoices and receipts. The auditor may request assistance from the staff of the business to obtain certain information or clarification. Depending on the results of the audit, the auditor may propose reassessments or adjustments to the tax return of the business.
Some of the common areas that auditors pay attention to include unusual expenses, revenue discrepancies and understated income. Business owners should keep clear records with clear audit trail to prevent financial confusion.