For most business owners, the last thing they want is to receive a notice from the CRA that their business is getting audited.
Although it may seem like a stressful situation to deal with, it’s important to remain calm. There are a handful of reasons for your business to be audited, and in most cases, the worst that can happen is that you owe some money.
An incredibly small percentage of businesses get audited, with 1 in every 100 companies receiving a notice every year. Without the help of an experienced accounting team handling all of your finances, it can be easy to report miscalculated information when filing taxes.
The prospect of owing more taxes than you previously believed, while being on a tight budget can be a little daunting. Luckily, there are a few simple steps you can take to ensure you’re not part of the 1 percent of businesses that get audited.
What Is Auditing?
When a company hears the term “audit,” they immediately think of the CRA searching for any tax discrepancies in your business’s financials.
When an audit is issued, your business’s financial records are examined to make sure they support the amount that has been filed in the tax returns. Documents such as income reports, tax deductions, and accounting books are looked at during a routine audit.
There is a common misconception that all audits are bad, which is not the case. The final report will help you spot problems within your business by letting you know whether your records are missing, accurate, or inaccurate.
Two types of audits exist: Internal and external. An internal audit is conducted by someone within your organization, which allows you to catch financial mistakes and check in on company goals.
On the other hand, external audits are initiated by third parties such as insurance companies or the Canada Revenue Agency and may lead to an investigation of the company as a whole.
How to Handle Being Audited
The first thing to do in any stressful situation is to not panic, although that may be easier said than done.
In many cases, when a business receives a notice from the CRA, it’s most likely a tax review rather than a full audit. In this situation, you only need to provide the information that has been requested and the matter is generally over.
If a notice has been sent, you must acknowledge it and respond within the timeframe given. The last thing you want is to be on the CRA’s bad side.
Be sure to provide all the documentation that has been requested with as much clarity and detail as required. In case you have any missing documents, make sure to specify the reason why.
When the information is presented properly, the audit process runs much smoother and the matter is handled quickly. To ensure a good outcome, consider bringing in an experienced accountant to handle all the information and procedures.
Professional Accounting Services in Ottawa
Running a business is no simple task. Maintaining and analyzing financial records while also searching for growth opportunities can be a difficult job, but an essential one nonetheless.
Our expert Ottawa accountants at Priti Lad Professional Corporation will gladly take over the task, managing financial statements and identifying problem areas that need to be addressed.
Reach out to us to learn more about our accounting services and book your consultation today.
