# What is an audit like?



## ITConsultant (Mar 5, 2014)

*FYI: I'm not talking about clarifications/review where they send you a letter or call you and ask for more information or documentation. I think we all get those.*

I'm talking about a full audit where they go through literally everything. Curious to know what an audit is actually like, and how common they are. I always hear how terrible it is, but are they really that terrible if you have all your documentation and can justify everything? Would like to hear it from the horses mouth.

What is it like?


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## domelight (Oct 12, 2012)

ITConsultant said:


> *FYI: I'm not talking about clarifications/review where they send you a letter or call you and ask for more information or documentation. I think we all get those.*
> 
> I'm talking about a full audit where they go through literally everything. Curious to know what an audit is actually like, and how common they are. I always hear how terrible it is, but are they really that terrible if you have all your documentation and can justify everything? Would like to hear it from the horses mouth.
> 
> What is it like?


 Depends on the auditor Usually it's not a big deal.

1. Book an appointment
2. Meet for a tour of the business and an orientation meeting usually about one-two hours. lots of questions about how you do the books, how you deal with certain transactions.
3. Then they can perform their review at your place or take the books with them. It's your choice.
4. after they review the books they go through their findings and discuss any questions with you.
5. You want to have an in house meeting for the follow up, it's much easier to address their questions face to face then try to get them to change their reports via the mail.
6. If your not going to have professional representation and something comes up, ask to see the applicable section of the act. Remember CRA is just people and they make mistakes too.
7. As of late I have seen CRA asking you to fill out a form of your personal living expenses at the beginning of the audit. You do not need to fill out this form. They will quote you a section of the act (I cant remember the exact section at the moment) which states you must co-operate with anything relevant to the audit. Your personal living expenses are not relevant at the beginning. (Once their done, if you have $5 to live on for the year, it then become's relevant)
8. Refusing to fill out a form at the beginning is not a great way to start but if you've done nothing wrong then you have nothing to worry about and what you spend on toilet paper and hemroid cream is none of CRA's business.
9. You could have been choosen due to specific things you reported on your tax return, or too many business losses, large HST refund or just a random number picked by a computer. CRA has a set % of taxpayers to audit annually, as well as they do target specific business sectors from time to time.


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## youngdad3 (Jun 29, 2013)

I went through it last year on my buisness side (do they audit individuals also? not sure). As we had the choice, we chose not to let them come inside our retail store (could scare customers) so we sent them directly to our accountant's office. He had better knowledge than us anyway to answer their questions and was, well... more relaxed.
They took 2 full weeks to go through 6 boxes of the last 3 years worth of accounting. I do not believe they do random audits as we were in business for 12 years and never had an audit before but after having an issue with one of our supplier which certainly raised a red flag we received an audit notice 6 months later. It was really not as bad as we thought, you know you read all kind of scary stuff on the internet but if you are well organized and keep proof of everything you will make it. 
In the end it did cost us a few grands as they have to justify their salary somehow :rolleyes2:


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## Just a Guy (Mar 27, 2012)

It's scary as hell...until you ask around.

I had a full corporate/personal audit a few years back. They looked at two years for me, my wife and the corporation. Took a couple of weeks...

I began asking around, it turned out I was the only business owner I knew who hadn't been audited. The best case scenario I found in talking to others was about $100 problem and the worst was a couple $1000.

They spent a couple weeks over at my acccountant's office and I the end...found absolutely nothing wrong.

Of course my accountant then sent me a bill for a couple grand...

Would I want to do it again? Not likely...is it bad, not really, but then I don't really understand accounting...I took math in school where 2+2=4...not a loss of three million dollars.


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## fraser (May 15, 2010)

In my experience they typically start in two areas. The first is any glaring expense irregularities such as someone placing a capital purchase on the CCA schedule AND expensing the total amount (ie expense and depreciation). The second is fairly straightforward. They get all of the bank statements, add up the deposits, subtract the non income items, and compare the total to the reported income.

As long as you have all your documentation the audit will be fine.

Just remember....answer the questions but do NOT volunteer any additional information. Motor mouths are their own worst enemy!


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## NorthKC (Apr 1, 2013)

As an accountant who deal with CRA all the time including the audits, I can tell you one thing. All they care about is that you've reported things properly. If there's a small error, they're pretty reasonable. If you get nasty with them, they will get nasty with you too. If you're co-operative and never really had an issue with your books, they're pretty easy going. This fits the profile of 90% of the agents who does the audits. If you can justify the expense, they will allow it or allow for a slight adjustment as opposed to a full denial and give you a warning and they'll follow up on that the following year. They prefer to work on site as it's easier to ask questions while they're there. In all the audits I've been in, they rarely stay more than a week depending on the nature of the audit.

And whatever you do, DO NOT sign a form that will allow them to check things beyond 3 years ago. This is a waiver form that waives all statutes of limitations and allow the CRA to go full bore into your files over the last 10 years. This is especially important if your books have been a mess. Of course, if you were so grossly negligent in the file, they do have the right to search your books beyond 3 years with a warrant.


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