Preparing for CRA Auditors

I love telling success stories. This one is definitely an awesome success story of what we did for one client. They run a successful professional practice and grew by leaps and bounds in a very short amount of time. Over just 4 short years they grew from sole practitioner to 30 professionals working for this successful owner. Needless to say when you grow this fast you are bound to be catching the attention of the CRA and their computerized data filters.

The Beginning

The story goes like this, on a Monday the prospective client cold called us asking about accounting services. They received a very gentle and friendly letter from the CRA that they were going to harmlessly come to their place of business and perform a routine audit. “Not to worry” says the CRA but of course there is everything to worry about. By Wednesday we met with the owner and realized quickly why they were being audited. It was a payroll audit.

These are the issues we found just from a one hour complimentary discussion with them:

  • Their previous bookkeeper had not been paying attention to payroll remittance deadlines, they’re due on the 15th of each month
  • The T4’s were not filed, prepared, but apparently never filed.
  • The T4’s prepared were also incorrect.
  • They had no real payroll ledger to show what each employee made by pay period.
  • Employment benefits were also not being tracked

From our experience, if this client walked into the CRA audit with all of the above issues, they’re probably going to giving up a chunk of money at the end of the experience.

The Battle Plan

We sat down to work right away, in that same meeting we wasted no time, we came up with a list of things we needed from the client, we created an action plan of what needs to get done. The auditors were coming in 2 weeks. Oh no! Short timeline! Our primary objective was to make a payroll ledger, account for the benefits to each employee, and a set of real T4’s for the employees. In the meantime without a proper bookkeeper (she wasn’t fired, she disappeared) we were going to continue the function of payroll until the client found a suitable bookkeeper replacement.

Lots of emails, record dropoffs, and several meetings in between. We even coached the client for what to expect during the audit. The auditor in this case asked not to see us the accountants, but only to see the client, so we had to prepare the client. The end product at the end of 2 weeks was a thick paper package that will guide the CRA auditor to do their work as streamline as possible.

Don’t forget we were also running payroll for 30 staff we knew nothing about in the background while we produced this massive audit working paper package.

The Results

The CRA auditor showed up to the client’s home. They asked exactly the questions we thought they would, for which our client was already prepared in advance. They looked through our package for a couple of short minutes…

He called me from the client’s place of business…

“Wilson this is a really comprehensive package… it appears to be all I need, I don’t need to spend any more time here….”

He just got up and left after just an hour of simple questions and browsing through our package.

Three weeks later, no fines, no penalties, no extra taxes even, another success story for our client.

 

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