News of an audit can be stressful to any organization, even to those who are diligent in complying with the Income Tax Act. While some audits are the result of targeted reviews of particular activities, some are simply due to random selection. In any case, if your charity has received a letter for an audit, below are some steps to take to give you the best chance towards a positive outcome:


1. Review the Audit Notification/Information Request Carefully

Make sure your charity understands what the auditor will require of you, and what documents they will be requesting. If the audit is to be a field audit, the CRA auditor visits the charity’s premises on a specified date. If it is to be a desk audit, the documents are to be sent to the auditor for review. Between a field audit and desk audit, different documents will need to be ready for the audit date.


2. Consult Counsel

Counsel can provide input regarding the parameters of the audit, and can assist in conducting a pre-audit review of compliance. The pre-audit review may be able to identify and address issues prior to the audit, and uncover any non-compliance that would otherwise have been unprepared for.


3. Manage Audit Day

On the day of the audit, be sure to have the requested information prepared and be ready to identify any requested documents. It would be strategic to assign a staff who knows the ins and outs of the charity’s operations and its books and records to cooperate with the auditor.


4. Address Audit Results

Upon completion of the audit, the charity will receive a summary of the auditor’s findings. This can range from a clean audit report, to an education letter, to a compliance agreement, and finally to sanctions that could include a proposal of revocation. Legal counsel should be sought as soon as possible after the audit results.


The best way to ensure a positive audit outcome, or avoid an audit altogether, is to be proactive in complying with the Income Tax Act. Charities must familiarize themselves and comply with the rules in the Act, contacting their advisors if they are ever unsure. This will ensure that when the letter does come, your charity will be prepared to deal with the audit.