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Getting financial statements ready for an audit comes down to one job: give the auditor books that agree with the bank, the CRA and each other. Close the year, reconcile every account, choose the reporting framework and gather the paper behind each big number. Do that and the audit is a few weeks of questions, not a hunt for missing files.
What should be finished before the auditor arrives?
The books themselves. A trial balance that still moves every day can’t be audited, so lock the period once your accountant agrees it’s final.
- Bank, credit card and loan accounts reconciled to the statements at year end
- Receivables and payables listed by customer and supplier, with ages
- Fixed assets listed with purchase dates and costs
- Payroll and sales tax remittances matched to the amounts recorded
- Share records, minutes and loan agreements in one folder
The CRA’s general rule is to keep required records for six years from the end of the last tax year they relate to. Share registers and papers on buying or selling property have no end date. So most of the folder should exist already. If it doesn’t, start there.
Which framework do your statements follow?
Canadian private enterprises can prepare statements under ASPE, which is Part II of the CPA Canada Handbook, or under IFRS, which is Part I. Publicly accountable enterprises use IFRS. It’s a choice to make early, with your accountant, because switching after the year closes means redoing work.
Tell the auditor which one you use in the first meeting. It shapes how they read every note.
How do you prepare financial statements for an audit without surprises?
Look at your own numbers the way the auditor will. They compare this year to last year and ask about anything that moved. Work out margins first, using the profit margin calculator, and write a one-line reason for each swing.
Then check the liabilities, which is where people slip. Take a monthly payroll of three employees at $3,000 each in Ontario. The payroll remittance estimate shows $2,196.07 to send the CRA for the month, made up of $1,507.26 held back from pay and $688.82 as your own CPP and EI. If that money hasn’t been sent by year end, it belongs on your balance sheet as owing. Auditors look for exactly this.
The net worth estimate is built for households, but it shows the same idea: assets minus debts gives what’s left. A business balance sheet works the same way, with more lines.
What does the audit calendar look like?
For a company with a December 31 year end, the sensible order is simple. January: close the books and reconcile. February: hand the auditor the support and answer the first round of questions. March: review the draft statements and fix anything that’s off. That’s a plan, not a rule, and your auditor may ask for a different rhythm, so agree dates in writing at the start.
The earlier you hand things over, the less back and forth you’ll have. Auditors tend to ask for the same dozen items in the same order. A folder that’s already sorted that way is worth a lot of goodwill.
Picture a small contractor in Saskatoon whose year end is June 30. Same idea, shifted six months: close and reconcile in July, hand over support in August, review the draft in September. The dates move, the order doesn’t. Whatever your year end, count backwards from the date a lender or shareholder wants the statements and leave yourself a cushion for the questions you can’t predict.
What does the CBCA say about approving the statements?
For a federal corporation that sells securities to the public, section 171 of the CBCA requires an audit committee to review the financial statements before the directors approve them. The committee needs at least three directors, and most can’t be officers or employees. Other corporations don’t have to have one, though they may set one up.
Directors and officers also have to tell the audit committee and the auditor promptly if they learn of an error in the statements. That’s a legal duty in the Act, so raise problems early instead of hoping the auditor won’t find them. See the role of audit committees for more.
Mistakes that make audits slower
Unreconciled accounts head the list. Then come one-off entries with no support, a shareholder loan nobody wrote down, and inventory counts that arrive late. Also, don’t clean up old entries quietly once the audit starts. Tell the auditor what you changed and why.
Timing and fees are outside what we could confirm, so ask for a written scope before you start. Tax questions can come up as well, and the corporate tax calculator gives a rough estimate to compare with your accrual, though it leaves out several adjustments.
Where the numbers come from
The record-keeping period is from Canada Revenue Agency guidance. The audit committee rules are from section 171 of the Canada Business Corporations Act, linked above. The framework choice comes from the CPA Canada Handbook. The payroll figures are our own calculator’s estimate for 2026 in Ontario.
Frequently asked questions
What do auditors need first?
Reconciled bank and loan accounts, a final trial balance, lists of receivables, payables and fixed assets, and the share records and loan agreements.
Should I use ASPE or IFRS?
Private enterprises can choose either. Publicly accountable enterprises use IFRS. Decide with your accountant before the year closes.
How long do I keep the records an auditor sees?
The CRA says generally six years from the end of the last tax year they relate to. Share registers and property records are kept indefinitely.
Do private companies need an audit committee?
Section 171 of the CBCA requires one for distributing corporations unless exempted. Other corporations may set one up but don't have to.
Can I fix an error once the audit has started?
Yes, but tell the auditor what changed and why. Directors and officers must promptly report known errors in the statements to the audit committee and auditor.
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