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An audit trail in bookkeeping is the chain that lets someone follow a number in your reports back to the document that created it, and the CRA expects that chain to last six years from the end of the last tax year the records relate to. If a figure on your GST/HST return can’t be traced to an invoice, a bank line and an entry, it’s a problem, whatever software you use.
What does an audit trail actually contain?
Three things, in order. The source document (invoice, receipt, contract, deposit slip). The entry made from it (date, amount, account, who made it). And the report that entry ends up in. An auditor works backwards along that line, so each step needs a reference to the next.
The CRA’s own list of acceptable source documents is plain: invoices, vouchers, formal contracts, work orders, delivery slips, purchase orders and bank deposit slips. Nothing fancy. The point is that a stranger could pick your books up cold and rebuild a total.
Modern accounting software adds a fourth piece, a log of edits. It shows who changed an entry, when, and what it said before. Switch that on if your product has it, and check that a user with admin rights can’t quietly delete the log itself. We couldn’t confirm what any particular product records, so test yours with a dummy entry.
How long do you keep the trail?
The default is six years. But the clock isn’t always the tax year end, and the exceptions are where people slip.
| Situation | How long to keep records |
|---|---|
| General rule | Six years from the end of the last tax year they relate to |
| Return filed late | Six years from the day the return is filed |
| Corporate minutes, share records, general ledgers | Two years after the corporation is dissolved |
| Notice of objection or appeal | Until it is settled and the time for any further appeal has passed |
| Early destruction | Only with the CRA’s written permission (Form T137) |
Keep the records at your home or place of business in Canada, unless the CRA has agreed to another place. Paper, electronic or both are all fine. If your books live on a computer, the electronic version has to stay readable for the full period, even when you also hold paper copies. Information Circular IC05-1 covers the electronic rules.
Can you test a trail with one invoice?
Say an Ontario business invoices $48,000 for a job. At the 13% rate, the GST/HST calculator shows $6,240 of HST, so the customer owes $54,240. Here’s what a clean trail looks like for it.
The invoice is numbered and saved as a PDF. The sales entry shows $48,000 revenue, $6,240 HST collected and $54,240 receivable, all with the invoice number. When the customer pays, the bank deposit is matched to that receivable, not typed in as new income.
Now the awkward case. Someone later changes the sale to $46,000 because of a discount. A weak system overwrites the old figure. A good one keeps the original, posts a credit note, and records the new HST. If you only know the amount paid, the HST reverse calculator backs the tax out of a total, but don’t rely on that alone. The credit note is the evidence.
Where audit trails break
Most breaks aren’t fraud. They’re habits. Cash paid out with no receipt. One bank account used for personal and business spending. Journal entries with the description “adjustment”. Files renamed when the phone was full. Each one is small, and together they leave an auditor with nothing to follow.
Reconciliation is the cheapest fix. Match the bank to the books every month, and write a short note on anything you can’t explain. It takes an hour and it catches a wrong amount while you still remember the deal.
Who should be allowed to post entries? Fewer people than you’d guess. If the person who approves payments also records them and reconciles the bank, nobody is checking anybody. In a small firm that’s hard to avoid, so at least have the owner look over the bank reconciliation and the list of edited entries each month.
How does the audit trail tie into your tax numbers?
Every line on a return should lead back to the books. If you’re self-employed, the self-employed tax calculator is a quick way to see what your profit figure means for tax, but the profit itself is only as good as the entries under it. The same goes for a corporation working out its bill with the corporate tax calculator. It ignores things like associated corporations and the phase-outs, and the Ontario small business figure for 2026 is a blend we derived for a calendar year, not a published rate.
A short checklist for this month
- Every entry has a document, or a note saying why not.
- Edits are logged, and the log can’t be switched off by staff.
- Backups run, and someone has tried opening one.
- The bank is reconciled, with a signed or initialled record.
- Files are named the same way, so a search finds them.
Where the numbers come from
Retention periods and location rules come from the Canada Revenue Agency’s pages on keeping records and its Information Circular IC78-10, as we read them in 2026. The HST rate for Ontario comes from our sales tax engine. Nothing here is a ruling. For a specific audit, the notice from the CRA is what you follow.
Frequently asked questions
How long must I keep bookkeeping records in Canada?
Six years from the end of the last tax year they relate to, in general. If you file late, the six years run from the filing date.
Are electronic records enough?
Yes, the CRA accepts paper, electronic or both. Electronic records must stay in a readable format for the whole retention period.
Can I destroy records early?
Only with the CRA's written permission, requested on Form T137.
What counts as a source document?
Invoices, vouchers, formal contracts, work orders, delivery slips, purchase orders and bank deposit slips are the CRA's own examples.
Where do I have to keep the records?
At your home or place of business in Canada, unless the CRA gives permission to keep them elsewhere.
- 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
Information only. This page is general information, not tax, legal or accounting advice. Tax-Services.ca is an independent publisher: we don't prepare or file tax returns or offer tax services, and we have no connection with the CRA, Revenu Québec, any government or any company named on this page. Check the figures that matter with an official source or a qualified professional.