CRA Audits

Many clients come to us with two big questions: “How likely is it to be audited?” and “Why does the CRA conduct audits?” In reality, CRA audits happen in two main ways. Sometimes, businesses are chosen purely at random through statistical models. In other cases, returns are selected for a targeted review when certain risk factors, unusual activity, or inconsistencies raise red flags.

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When a CRA audit takes place, the process involves a detailed review of your records to confirm whether you have reported your income correctly, claimed deductions and credits properly, and paid the correct amount of tax. The CRA also checks whether you have only received the benefits and refunds you are entitled to. To do this, auditors may examine a wide range of documents, including business ledgers, receipts, contracts, and bank records. They may also look at personal records such as mortgage statements or credit card transactions, and in some cases, third-party records from spouses, partners, family members, or corporations connected to you.

At the end of the review, the CRA will issue one of two outcomes. Either no changes are made, meaning your return was accurate and no additional tax is owed, or a reassessment is issued, which may require you to pay more tax—or in some cases, receive an additional refund. If you are reassessed, you’ll have 30 days to accept the CRA’s proposal or challenge it by providing additional evidence and explanations to support your position. Certain situations tend to increase the likelihood of a CRA audit. These include sudden or unexplained income or expense changes, repeated business losses over multiple years, or expense claims that are unusually high compared to others in the same industry. The CRA also uses industry codes to benchmark profit margins, so results that differ greatly from industry standards may attract attention. Other common triggers include large charitable donations that don’t align with reported income, missing T-slips such as T4s or T5s (which the CRA already has on file), shareholder loans not repaid within a year, overstated home office deductions, and mismatches between HST returns and income tax filings. Facing an audit can feel stressful and overwhelming, but you don’t have to go through it alone. At ADYZER, our tax specialists provide complete support throughout the audit process. We work with you to develop a clear strategy, handle communication with the CRA on your behalf, and negotiate to ensure fair treatment while minimizing potential penalties. Our team reviews all documentation, prepares strong supporting evidence, and corrects any errors in your records to bring everything into full compliance. With ADYZER at your side, you can approach an audit with confidence, knowing that you have experienced professionals protecting your interests.