CRA Audit Process in Canada – What to Expect and How to Prepare

Many people living in Canada think that a CRA audit can be stressful. Usually, when a person hears the word audit, it comes with a picture of long paperwork, frequent meetings, and fear of making mistakes. But do you know that in reality, the audit does not mean you did something wrong?

The Canada Revenue Agency (CRA) conducts audits to make sure tax returns are accurate and that everyone follows the same rules.

So if you have received a CRA audit or want to be prepared, this guide will help you in the CRA audit process step by step. You will know the purpose of the audit. Which documents are required, and how long does an audit take? What are your rights as a taxpayer, and how to prepare?

What is the CRA Audit Process?

The CRA audit process is when tax officials review your records. To check if your income, expenses, and credits match what you reported on your tax return. The goal is to confirm your tax return is accurate.

An audit may be:

• A correspondence (desk) audit, handled by mail/online and sometimes by phone.
• A field audit, CRA visits your business location, home office (if applicable), or your representative’s office.
• An office audit (at a CRA office) or a broader multi-year review if needed.

Why the CRA Audits Businesses and Individuals

CRA audits are done not as punishment, but as a check for accuracy and transparency. The agency’s purpose is to make sure people follow the rules. Under the Income Tax Act and Excise Tax Act (for things like GST/HST).

• CRA uses risk assessment tools to select files. They look for unusual deductions or expenses, repeated business losses, and big changes in income or expenses.
• Industries that deal largely in cash or where under-reporting is more common (restaurants, contractors) are more likely to get audited. 
• Also, mismatched information (for example, your T-slip data vs. what you filed) can trigger an audit. 

What Happens After Receiving a CRA Audit Notice?

You’ll receive an audit letter (and often a phone call) outlining the scope, requested documents, and your CRA contact.

How CRA Selects Files for Audit 

Some common CRA audit triggers are:

• High or unusual expense claims
• Multiple years of business or rental losses
• Large GST/HST claims or refunds
• Discrepancies between what other parties (e.g. banks, employers) report and what you report
• Claiming foreign or crypto income incorrectly or not reporting at all
• Submitting returns late or with poor recordkeeping

CRA has tools and automated systems that compare tax returns with others in the same industry to spot outliers. 

CRA Audit Documentation 

The CRA may request documents that you need to provide. Includes 

• Personal and business bank statements.
• Credit card records.
• Sales invoices and receipts.
• Payroll records.
• Expense documentation (mileage logs, home office expenses, utilities).
• Investment records.
• Previous tax returns.

Keep all financial records for at least six years from the end of the last tax year they relate to; CRA can request them for review.

Types of CRA Audits

It helps to know what kind of audit you may face:

1. Desk Audit: CRA asks for documents by mail or via secure portal. Usually limited scope.
2. Field Audit: The Auditor visits your home, office, or accountant’s place. More detailed, often broader in scope.
3. GST/HST Audit: Focuses on GST/HST remittances, whether you claimed or charged correctly.
4. Payroll Audits: It checks that you reported payroll correctly and remitted CPP, EI, and income tax deductions.

What Happens After You Receive a CRA Audit Notice

Once CRA selects you for an audit. They will issue a Notice of Audit or Request for Information. Things you’ll see are:

• Which tax years are being reviewed
• Which parts of your return are under scrutiny (income, expenses, GST/HST, etc)
• The list of documents or records they want you to provide
• Time deadlines for providing information
• Name/contact of the auditor or CRA agent

Act fast. Gather your audit documentation: all relevant T-slips, invoices, receipts, bank statements, ledgers, contracts, payroll records, etc.

CRA Audit Timeline: How Long Does It Take

How long an audit takes depends on many things, but here’s a rough timeline:

Stage	Typical Duration
From audit notice to submission of initial documents	A few weeks (depending on how quickly you gather things)
Desk audits	Several weeks to a few months
Field audits	Several months, sometimes up to a year or more, especially if many years are involved or the business/records are complex
Resolution (final report/reassessment)	After documents are reviewed and discussions made, it could be a few weeks (desk audits) or months (field)

Bestax Accountants notes that well-organized records and prompt replies shorten the timeline. Delays often come from missing documentation or unclear responses.

Taxpayer Rights During a CRA Audit

You are not helpless. Many Canadians don’t know they have rights during an audit. Under the Taxpayer Bill of Rights, you have certain protections:

• The right to be treated professionally, courteously, and with respect.
• Privacy and confidentiality in your dealings with CRA.
• The right to full information: you can ask CRA to explain things, show you what they’re relying on.
• The right to object or appeal CRA’s conclusions if you think they are wrong. For example, by lodging a Notice of Objection.
• You have the right to a formal review and appeal of decisions.

What If You Disagree With the Audit Findings? 

After reviewing your file, CRA usually issues a proposal letter with its findings and gives you time (often about 30 days) to respond before any reassessment. It may propose adjustments, additional taxes due, or possibly refunds or credits if your documents support them. You have rights here:

1. You can discuss it with the auditor, as sometimes further discussion can clarify a misunderstanding.
2. If still unresolved, escalate to the auditor’s supervisor or team lead.
3. You can also file a formal objection via CRA’s Appeals Division if needed. You generally have 90 days from the date of the Notice of Assessment or Reassessment to file a Notice of Objection; you can apply for an extension of up to one additional year if needed.
4. If the objection is not resolved to your satisfaction. Then you can appeal to the Tax Court of Canada.

How to Prepare in Advance

To reduce the risk of a CRA audit, you can follow these steps.

• It’s important to keep good records all the time. For example, invoices, receipts, bank statements, and contracts. Store them in an organized system. You can also keep separate business and personal finances separate. Don’t mix personal expenses with business ones.
• Use accounting software, or you can hire a bookkeeper/accountant. Understand what expenses are allowed under the Income Tax Act or Excise Tax Act.
• Respond quickly if CRA asks for documents. The faster, the better.
• Seek help early: If uncertain, bring in professionals. Bestax CA offers CRA audit representation and preparation services.

CRA Audit Process: Step-by-Step

Here are the simple steps to follow. You will know what to expect from start to finish:

1. Notice of Audit  CRA informs you which years or parts of your return are under review.
2. Request for Information: They ask for documents. Like records and previous documentation.
3. Submission of Records: It’s important to collect & submit the requested documents on time.
4. Desk Audit or Field Audit: CRA reviews documents, may visit in person for a field audit.
5. Findings & Proposal: The auditor sends possible adjustments, if neede,d in the process.
6. Discussion / Clarification: You respond with clarifications or additional evidence.
7. Reassessment / Resolution: CRA issues a Notice of Reassessment if there are adjustments. Or confirms your return.
8. Objection / Appeal (if needed): You may file a Notice of Objection and move to appeal if necessary.

Common CRA Audit Triggers

To avoid triggering an audit, be aware of these red flags:

• Excessive deductions in certain categories (home office, travel, entertainment)
• Consistent business/rental losses year after year
• Big differences between what third parties report (banks, employers) and your return
• Large GST/HST refunds, or failure to file returns on time
• Using cash transactions without documentation
• Foreign income or assets not disclosed

Many audits get triggered by matching errors (T-slips, third-party data) and by filing behaviour.

Need Help with CRA Audit Preparation?

Facing a CRA audit doesn’t have to be overwhelming. With proper guidance, you can get through the process smoothly and avoid costly mistakes. The experts at Bestax specialize in helping Canadians with CRA audit preparation, corporate tax filing, and compliance. Whether it’s gathering documents, communicating with CRA, or appealing decisions, they’ll stand by your side.

Quick FAQs

Disclaimer: The information provided in this blog is for general informational purposes only. For professional assistance and advice, please contact experts.