What are the red flags that will spark an audit?
An audit is a study of someone’s books and records. Technology has made it easy for Revenue Canada to carry out random audits or targeted investigations of businesses, professionals and the self-employed. Investigators can select returns that are above average or below average in a specific financial category or they can combine various financial factors in one search. One year, Revenue Canada audited all pharmacists with below-average profits and found many cases of non-compliance, some of which were taken to court. Revenue Canada is not out to harass those who are “squeaky clean”. Auditors look for non-compliance, undisclosed income and inconsistencies or unusual patterns in selecting audit criteria and candidates. Personal returns are not audited, as individuals do not have financial books. However, they may be screened when auditors carry out assessment checks for RRSP contributions, moving expenses or any other claim categories.
