One of the most common mistakes we see taxpayers make during a
Canada Revenue Agency (“CRA”) audit is that they do not
record what documents were requested by the auditor, what documents
were provided to the auditor, and when those documents were
provided to the auditor. What is common is that documents are
requested by the CRA auditor and the taxpayer is so nervous and
anxious about the auditor that they run around providing everything
that is asked without making a list. The taxpayer wants the
audit to happen so quickly (so the auditor will leave) that they do
not take time to think about how best to protect themselves.
What could go wrong during an audit?
We have seen cases where the CRA auditor forgets that they did
not ask for something, but says it was never provided.
Accusations are easily made against a taxpayer and are sometimes
used to justify an arbitrary assessment. When you have a
list, you have evidence that the CRA auditor did not ask for the
document or was provided the document. If you diligently make
the list, the CRA auditor may have to think twice about how you
should be treated – you are acting professionally and
We have seen many things happen during CRA audits over the
years. We have seen cases where the CRA auditor asks for
documents and loses the documents. This has happened in too
many files. The worst case I remember happened many years ago
during an Ontario provincial sales tax audit. A Ministry of
Finance auditor asked a taxpayer for a USB key with all the
companies bookkeeping records and was provided with all of the
taxpayer’s books and records. After a few months had
passed, the auditor admitted to the taxpayer that he had lost the
USB key and had no idea where it could be. The auditor had to
ask for the information again and the taxpayer was uncomfortable
providing another USB key for obvious reasons. The auditor
had to admit his error because the taxpayer had a list and he had
initialed that he had received the USB key.
Recently, a CRA GST/HST appeals officer informed us that no
documents provided during the audit had been uploaded in the system
and he could not get the auditor’s files. He took the
position that our client had not provided the documents. We were
asked to provided all the documents again (which amounted to a
number of boxes). Luckily, we had the list and we kept copies of
all documents that had been provided in audit binders. When
each document was provided, three copies were made. One copy
was made for the CRA auditor, one copy was made for the audit
binder and one copy was made for the scanned electronic
record. All documents were stamped confidential before being
copied. We were able to provide the list and all the documents
within 48 hours.
In another file, the CRA GST/HST auditor started an input tax
credit audit and spend months looking through invoices and purchase
documents. The audit changed courses after many months and
many requests for documents. An arbitrary assessment was issued
because a limitation period was about to expire. We had been
preparing the list and keeping copies of the documents. When
we performed the same audit on the same documents, the assessment
was almost zero. We filed a notice of objection and
eventually the appeals officer received our analysis. The
objection was successful because we were able to show that we had a
list of documents provided and what the correct analysis of those
We have developed a template Audit List for taxpayers to use
during audits. This is the same template that we give our
clients who ask us to help them during the audit process.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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