As an accounting firm, we can assist in the auditing process from within your company to an external examination by the government. If you have been contacted by the CRA to review a claim made on your tax return, we can provide assistance by preparing a package to send to CRA for review, or by having the auditor come to our office instead of your place of business.
What is the difference between an annual audit a company has done by their accounting firm versus a random government audit?
An annual audit a company has done by their accounting firm should be a considered part of your accounting cycle. A government audit can be a random review or very specific investigation of an area or time frame of your business activities.
Why are you being audited?
You may have a pattern of submitting payments on a regular basis and all of a sudden you (a) haven't paid or (b) asked for a refund (perhaps due to expansion which has incurred large expenses).
If these are out of character, it may bring attention to your account. You can help avoid the first scenario of not submitting by sending the paperwork in when it's due without payment, or with at least a partial payment. (I am assuming it was not sent because you can't pay it in full).
Don't be afraid to call and explain your situation. Try and think of it from their perspective, if the form isn't filled out, they have no idea why (have you gone bankrupt, has the business closed, or you are behind in your paperwork?, etc.)
The government may request a random or very specific audit.
They will inform you of:
- Why you are being audited
- What it is for, i.e., HST, payroll, etc.
- What you will need to provide for an examination
If you require time to prepare, you can ask for an extension.
If it is a government audit you can expect:
- An optional interview segment, where they will ask a lot of questions about every aspect of the business, (they should provide you with the questions ahead of time).
- That there may be more than one government staff, so again, have your own "team," so you won't feel intimidated.
- To be asked to provide back-up of any of your invoices, payments, statements, etc.
- To provide additional print-outs from your accounting software.
Know ahead of time what exactly is being reviewed and ask what information they will be requesting. The auditor will review a very specific area of your business such as HST, Payroll, etc. Further, they will focus on a very specific time frame. For example, if it is a GST review, it will probably be covering one of your submission periods.
Sending in your government reports without payment is better than just waiting until you can pay it. As no form may prompt the government to initiate an audit or review. Even better, send the paperwork with a partial payment. It shows continued business and good faith.
If possible, use a "team" approach. If you are being audited by a government department, have your bookkeeper(s) / accountant(s) in attendance to assist in several things, including:
- clarifying questions
- adding necessary information to your answers
- finding the required documentation
- printing requested reports.