Navigating the tax audit process

Understand why you were selected

Audit selection is not always personal; it can be based on digital screening. The CRA’s digital tools are looking for abnormalities or risks through a series of matching tests. For example, if your business is registered for HST and you declare income that is subject to HST, the software will detect if the HST reported makes sense given your reported income. This targeted approach helps the CRA identify legitimate areas of concern. Once the system makes a recommendation, an agent generally takes over the screening process to see if any review or audit action is warranted.  

Once an audit has been initiated, asking the CRA to explain why you were selected is a great way to help you understand what they are actually looking for so that your response can be tailored to ensure their concerns are addressed. 

Where the audit is in regard to a large or complex transaction or one that requires judgement, it becomes even more important to answer succinctly. Providing the CRA with excessive information, even if done so in order to show there is nothing to hide, can overwhelm the auditor and lead to additional questions or concerns as they try to understand the contents. 

Asking questions to clarify and understand the auditor’s concerns, asks, and audit plan become increasingly important as the complexity of the audited subject matter also increases. You have the right to ask for professional representation to help you navigate the process. Having your accountant or tax advisor manage the communications can help keep the process simple and ensure the audit stays on track.  

Be professional 

When conducting an audit, CRA agents are just doing their job which is to ensure fairness throughout the tax system. The tax system is complex and difficult to navigate, even for a CRA agent. It is important to balance the tone with which they are managed. The tone should not be adversarial but as the CRA does have a significant amount of power and a misrepresentation on either side can result in significant penalties, fines and administrative burden; the tone should also not be casual or too friendly. An agent should be managed in a professional, succinct, and resolution-focused tone. An audit is a legal process in the enforcement of the Income Tax Act, and the process should be handled in that manner. Documenting conversations, knowing each other’s rights and roles, respecting and clarifying response timelines, and leveraging professional support to minimize risks are paramount. 

The Taxpayer Bill of Rights 

Even though the CRA has significant power, taxpayer’s are entitled to fair and balanced treatment by the CRA. Understanding your rights is important to understanding how an audit should proceed and how an auditor should behave and deliver their work. Being clear about expectations, approach, and deliverables are key to preventing confusion and delaying the process. 

Get professional advice 

Even if you decide to represent yourself through an audit, keeping your existing Baker Tilly advisor apprised of developments and asking for assistance throughout the audit can help keep the audit moving favourably and without disruption. If you have recently been contacted about an audit and need help, our Baker Tilly advisors are ready to help. 

This article was first published on March 26, 2024, and was revised on January 7, 2026.