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To prepare for a financial audit in Canada, get your books and source documents into one place you can open quickly, and make sure they match what you filed. A CRA audit works from exactly that: the auditor checks that your books and records support the amounts on your returns. Everything below assumes that meaning, and a later section covers the other one.
What happens when the CRA says it’s auditing you?
A CRA auditor will usually contact you by phone to begin the audit process.
Business audits, canada.ca
You’re allowed to end that call, check who you were speaking to and ring back. A confirmation letter follows.
From there they set the years or reporting periods under review and tell you which documents they want. They ask for business records such as ledgers, invoices and bank statements. They can also ask for the owner’s personal records and those of related businesses, and they may talk to your accountant, bookkeeper or staff. Electronic copies are preferred. You can hand documents over at your premises, mail them, deliver them to an office or send them through a secure CRA service.
Don’t panic when the phone rings. An audit isn’t an accusation, and plenty of them close with no changes. It’s the CRA checking that the paper matches the return.
Which records should be ready?
Six years is the number to remember. Books, records and their source documents have to be kept for six years from the end of the last tax year they relate to, so records for the 2025 tax year (a December year end) run to the end of 2031. The clock starts at year end, not on the date printed on the receipt.
| Record | Check before anyone asks |
|---|---|
| Bank and card statements | Every month present, none missing |
| Sales invoices | Totals match reported revenue |
| Expense receipts | Each one linked to a ledger entry |
| Payroll files | Remittances match the payroll register |
| GST/HST records | Tax collected and claimed agree to returns |
How do you do a dry run on the numbers?
Pick three months at random and try to prove them. Start from the bank statement and try to trace each deposit to an invoice, then trace each large payment to a receipt or a contract. Anything you can’t match goes on a list, and you work out why before the auditor does.
That one exercise finds most gaps.
Then test the tax lines. Suppose you claimed a $5,000 expense in Ontario and the receipt shows HST inside the price. The reverse HST calculator says the price before tax was $4,424.78 and the HST was $575.22. If your books show a different split, fix the entry now.
Payroll is the same story. One Ontario employee paid $3,000 every two weeks should lead to roughly $961.03 of remittance per pay period, based on our payroll remittance calculator. If your actual remittances are far off, you want to know before the auditor does.
How should you behave during the audit?
Be polite, be on time and answer what’s asked. Appoint one person, you or your bookkeeper, as the contact, so documents don’t get lost between three inboxes. Keep a simple log of what you handed over and the date, and ask for a receipt or an email confirming it arrived.
If you disagree with something the auditor says, don’t argue on the phone. Write down your point, find the document that supports it and send it. You can bring your accountant into the conversation at any stage, and many owners do.
What if the auditor finds a problem?
You get a written summary. When no changes are needed, the audit closes. When the CRA proposes changes, you have 30 days to respond and can agree or disagree. A notice of reassessment follows, and you keep the right to file an objection.
Don’t guess at answers. If you don’t know, say you’ll find out and come back with the document. It’s slower, but it’s a lot better than a wrong answer on file. For a large or messy file, an accountant who has handled audits is worth the fee, and it’s smart to get a quote before you commit.
What if you mean an external audit of financial statements?
Some people use “financial audit” for the yearly audit of a company’s statements by an outside auditor. The preparation looks similar, since you need bank reconciliations, supporting schedules and a ledger that ties out. But the auditor sets the request list and the accounting standard, so ask for the list early.
Whichever audit it is, a tidy year saves time. The profit margin calculator and the corporate tax calculator help you spot numbers that don’t look right before someone else does.
Where we got these figures
The audit process and the six-year rule come from the Canada Revenue Agency‘s pages on business audits and on keeping records. The sales tax and payroll examples use our 2026 data, which we rechecked in October 2026. This is an independent site, and no government body is behind it.
Frequently asked questions
How does a CRA audit usually start?
With a phone call from an auditor. You can end the call to check their identity and phone back, and a confirmation letter follows.
How long do I have to keep records for an audit?
Six years from the end of the last tax year they relate to. Records for the 2025 tax year with a December year end run to the end of 2031.
What can the CRA ask to see?
Business ledgers, invoices and bank statements, and possibly the owner's personal records and those of related businesses. It may also speak to your accountant, bookkeeper or staff.
What if the auditor proposes changes?
You have 30 days to respond and can agree or disagree. A notice of reassessment follows, and you can file an objection.
Is an external audit of financial statements the same thing?
The records you need are similar, but the auditor sets the request list and standards. Ask for the list early.
- 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