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The types of audits a Canadian business can face from the CRA are an income tax audit, a GST/HST audit and a payroll examination. Each one checks your books against a different set of rules, and since combined audits were discontinued, a business now gets one kind at a time.
What are the main audit types for a business?
An income tax audit looks closely at your books and records to see that they support what you put on the return. The CRA is checking whether the income is complete and the expenses are real and belong to the business.
A GST/HST review, which the CRA calls an examination, checks that you worked out the GST/HST you collected, the input tax credits you claimed and the net tax correctly. It also goes through refund requests, which the CRA says it reviews systematically.
A payroll examination checks what you withheld and sent in for employees: CPP, EI and income tax, plus your own share of CPP and EI. The CRA says it may do this at the same time as a GST/HST examination. These two are called trust accounts examinations, because you’re holding that money for the government.
How do you know which kind you’re facing?
The first letter or call tells you. It names the program (income tax, GST/HST or payroll), the period under review and the records to have ready. Read that part twice. Gathering payroll registers for an income tax audit wastes a week, and missing the one thing the letter asked for slows everything down.
If the letter doesn’t make it clear, call the number on it and ask the officer to confirm in writing which program and which years are covered.
Desk or on-site, and how long does it take?
| Type | Where it happens | Timing the CRA gives |
|---|---|---|
| Income tax audit | At your business, home or representative’s office, or at a CRA office | Varies with your records and CRA resources |
| GST/HST examination | Phone, mail or online mail | Not stated on the pages we read |
| Payroll and GST/HST trust accounts | Phone, letter or online mail | Usually about 60 days: 15 to prepare, 30 to examine |
Audits are picked through risk assessment and, the CRA says, random file selection. We’ve seen long lists of “red flags” online, and we couldn’t confirm them from CRA pages, so we won’t repeat them. Your file may also be handled by an auditor in another region, since the CRA spreads files around.
What will the CRA ask to see?
For a payroll or GST/HST examination it lists bank statements and cancelled cheques, salary journals, T4 and T4A slips and summaries, financial statements, GST/HST returns and invoices, and employment contracts when the question is whether a worker is an employee. For an income tax audit you provide business records, and the CRA may also ask for personal financial records and records of related entities.
You keep records for a minimum of six years. That’s a rule, and failing to provide them is an offence under the law, in the CRA’s words. The guide Keeping Records (RC188) spells out the six years, counted from the end of the last tax year the records relate to.
A small habit helps here: before any examination, pull one month of bank statements, one month of invoices and one pay run, and see if they tie together. If you can follow the trail in ten minutes, an officer can too.
How much money can one audit involve?
Here’s a small case. One Ontario employee paid $2,000 a month means $391.82 to remit each month by our payroll remittance calculator: $244.53 held back from pay, plus $147.29 from you. Over twelve months that’s $4,701.84 that an examiner can test against your bank records. On sales, $10,000 a month in Ontario carries $1,300 of HST, which the GST/HST calculator shows. Put the two side by side and you can see why the trust accounts get so much attention. The money isn’t yours.
If an income tax audit reaches your self-employed profit, the self-employed tax calculator gives a rough idea of the tax at stake, and the corporate tax calculator does the same for a company. Both skip some details, so they only give you a range.
What happens when the audit ends?
You’ll get a letter. If your assessment was right, it says so. If not, you get a proposal letter giving the reason for the reassessment, and the CRA says you have 30 days to respond. If you disagree, call the auditor and explain with documents. You can also file an objection after a reassessment, and the CRA’s Taxpayer Bill of Rights applies throughout.
The CRA also describes an indirect method, often the net worth method, for cases where records don’t support income. That looks at assets, liabilities and lifestyle. It’s much easier to avoid than to argue with, and the way to avoid it is clean books.
Are other kinds of audits the same thing?
No. An audit of financial statements by an outside accountant is a separate thing. Lenders, owners or other bodies may ask for it, and it isn’t a CRA audit. We haven’t covered those rules here. Workplace safety and employment standards inspections are also run by other bodies, and we didn’t research them.
The sources behind this page
The descriptions come from the CRA‘s pages on business audits, GST/HST audit and examination, trust accounts examinations and the audit guide RC4188, read in September 2026. The GST/HST audit page we read is an older one, dated 2017, so check for changes. The examples use this site’s calculators with 2026 Ontario settings. We’re an independent site, and no government body is behind it.
Frequently asked questions
What kinds of CRA audits can a business face?
Income tax audits, GST/HST examinations and payroll examinations. The CRA says combined audits have been discontinued, so a business gets one kind at a time.
How does the CRA choose who to audit?
Through risk assessment and random file selection, in its words. We couldn't confirm any list of triggers.
How long do I have to answer a proposal letter?
The CRA says 30 days to respond to a proposal letter explaining a reassessment.
How long should I keep records?
A minimum of six years, according to the CRA audit guide RC4188.
Does the CRA contact me by email?
For trust accounts examinations it says its officers cannot contact you directly by email. It may use phone, letters or online mail.
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