Updated Checked by the Tax-Services.ca editorial team How we check
An internal financial audit starts with one question: could you prove every number on your last tax return? The CRA expects you to keep the records behind it for six years from the end of the last tax year they relate to, so that’s where a self-check begins.
Keep your records for six years from the end of the last tax year they relate to, unless you have permission from the CRA to destroy them earlier.
Keeping Records (RC188), canada.ca
Do you have to run an internal financial audit?
Not as far as we could find. The CRA pages we read set rules for keeping records and filing on time. They don’t tell a small business to audit itself. So this is a check you do for your own protection.
A sole proprietor with one bank account can do it in an afternoon. A company with staff, inventory and three revenue streams might need a few days spread over a month. Either way, the goal is the same, and it’s short: you want to find your own mistakes before the CRA, a lender or a buyer does.
What records should you be able to find?
The CRA’s guide on keeping records says the duty covers income tax, GST/HST, payroll and trusts. Your records have to give enough detail for the CRA to work out what you owe. Start by pulling one sample from each area and asking whether a stranger could follow it.
| Check | What the CRA guide says |
|---|---|
| How long to keep records | Six years from the end of the last tax year they relate to |
| Where to keep them | At your Canadian residence or place of business, unless the CRA gives permission otherwise |
| Computer records | Keep what accounting, point of sale and online systems create |
| Who is responsible | You, even if a bookkeeper or accountant keeps the books |
That last row surprises people. Handing the shoebox to a bookkeeper doesn’t hand over the responsibility, and nobody tells you that until a notice arrives.
How do you plan the work?
Block out the time before you start, and keep the scope small the first round. One quarter of data is plenty. Pick the quarter, then work through the same short list each time: bank statements matched to the books, a sample of invoices, one pay run, and the sales tax return for the period.
Write down every difference you find, however small, with the date and the amount. That page becomes your fix list, and next year’s version of the audit is faster because you know where trouble tends to hide.
How do you test payroll?
Payroll is where small errors repeat every pay period, so give it one careful test. Pick one pay run. Match the gross pay on the register to the amounts held back and the amount you actually sent in.
Here’s a case from our payroll remittance calculator. One employee paid $2,500 every two weeks has $555.55 held back for income tax, CPP and EI. You add $197.79 as the employer share. The total to remit is $753.34 for that period. If your payment for the same run is far off that, find out why before anything else in the audit.
The figure is a yearly estimate divided by pay periods, so it won’t match your payroll software to the cent. A gap of a few dollars is rounding. A gap of a few hundred is a problem. The payroll deductions calculator gives a second view of the same pay.
How do you test sales tax?
Take ten invoices and recompute the tax on each. It’s dull work, and it catches the classic error, a wrong tax code. On a $2,000 sale, the GST/HST calculator shows $260 of HST at 13% for Ontario, and $100 of GST at 5% for Alberta. One sale coded for the wrong province is $160 out. Repeat that across a year of invoices and you’ve got a real number.
Then compare the tax collected in your books to what you reported on your returns. The two should agree. If they don’t, write down the difference and chase it down line by line.
What goes wrong in a self-audit?
The biggest mistake is auditing your own work with the same eyes that did it. If you can, have someone who doesn’t handle the money check the sample. A business partner, a spouse who helps with the books or an outside bookkeeper all work.
The second is stopping at the bank statements, which feels thorough and isn’t. A statement proves money moved. It doesn’t prove what the money was for. Every deposit needs an invoice behind it and every expense needs a receipt.
The third is fixing things quietly. If you find a past return that was wrong, write down what happened and what you corrected. If the error means you owe tax for an earlier year, look at the CRA’s Voluntary Disclosures Program before you do anything else. The CRA describes it as a way to correct mistakes or missing information in earlier filings before it comes to you, and says that coming forward on your own can earn penalty and interest relief.
What does a good result look like?
A clean first pass isn’t “no mistakes”. It’s a short, honest list, each item with a name and a date next to it. Expect a few bucks of rounding here and there, a receipt or two you can’t find and maybe one tax code that needs fixing. That’s normal.
A limit on this page: we can’t tell you which controls your business needs. That depends on your staff, your cash handling and your systems. Checking a few random items won’t prove the books are clean. It shows whether the books are in the shape you think they are. To see where the money stands after tax, try the corporate tax calculator on your year-end profit. A result far from your accountant’s number is a good question to ask.
Where we got these figures
The record-keeping rules come from the Canada Revenue Agency guide RC188, Keeping Records. The payroll and sales tax examples come from the calculators on this site, which use 2026 rates. We checked the CRA pages in October 2026.
Frequently asked questions
How often should a small business check its own books?
At least once a year, before you file. A quick monthly check of payroll and sales tax catches repeat errors sooner.
How long do I keep the records I review?
The CRA says six years from the end of the last tax year they relate to, unless it gives you permission to destroy them earlier.
Can my bookkeeper do the audit?
Yes, but you stay responsible for the records. Someone who doesn't post the entries is a better checker than the person who does.
Is an internal audit the same as a CRA audit?
No. You run the first for yourself. The CRA decides on the second, and you can't schedule it.
What if I find an old mistake?
Write it down and work out what was missed. If tax is owing for an earlier year, read about the CRA's Voluntary Disclosures Program first.
- Dealing with the CRA: letters, audits and payments
Dealing with the CRA: what to do when a letter arrives, how a review differs from an audit, how My Account helps, and what to do if you can't pay