*JMHO* - to be taken with a grain of salt!
Yup, not looking forward to this one.
Anyone been thru an audit? I was told the initial interview lasts 2-3 hours, a list of questions. Any idea what goes on in this interview and what kind/type of questions I have to look forward to?
Anyone been thru an audit? I was told the initial interview lasts 2-3 hours, a list of questions. Any idea what goes on in this interview and what kind/type of questions I have to look forward to?
I'm presuming this is an "income tax" audit not a GST or payroll audit. Usually the auditor will pretty much stick to "their" area.
First off, your initial session should include plenty of questions but unless you are very very sure you know what to answer you are under no obligation to do anything but take notes and offer to provide answers at a later date (usually a week later).
The auditor will provide a list of documentation they want to see, this will include, bank statements, deposit books, sales records, expense records.
Areas of particular interest are often,how you record and track revenues (if they ask...do you receive cash payments? make sure to answer "correctly"), any cash expenses, automobile expenses, entertainment expenses. They will absolutely want explanations of all cheques that have been written to yourself (or to "cash"). Other payments to individuals instead of companies also get extra attention. You may need to explain your methods of record keeping, there is no right or wrong way, you just have to show that it's complete and has a reasonable expectation of accuracy.
Of course the type of entity you operate as (Corporation, Partnership, Sole Proprietor) will make a difference to how things proceed but the basics are the same. If it's not a corporation they will look much closer to see if you are trying to expense things which don't qualify. This is especially true if you operate from your residence or use a personal vehicle (as in "you sell digital downloads but you claim $20,000 in automobile expenses?").
Unless by some miracle (and an incredibly small and simple business) the auditor will want to return to examine all the documentation once it has been complied, this could take 1 or 2 days or 1 or 2 weeks all depending on the complexity and quantity of the material.
Most important, you can ALWAYS say "I'll have to find those files" or "I need to ask my bookeeper/accountant" of course you MUST come through with the answers as promised or you will have trouble.
Ben
First off, your initial session should include plenty of questions but unless you are very very sure you know what to answer you are under no obligation to do anything but take notes and offer to provide answers at a later date (usually a week later).
The auditor will provide a list of documentation they want to see, this will include, bank statements, deposit books, sales records, expense records.
Areas of particular interest are often,how you record and track revenues (if they ask...do you receive cash payments? make sure to answer "correctly"), any cash expenses, automobile expenses, entertainment expenses. They will absolutely want explanations of all cheques that have been written to yourself (or to "cash"). Other payments to individuals instead of companies also get extra attention. You may need to explain your methods of record keeping, there is no right or wrong way, you just have to show that it's complete and has a reasonable expectation of accuracy.
Of course the type of entity you operate as (Corporation, Partnership, Sole Proprietor) will make a difference to how things proceed but the basics are the same. If it's not a corporation they will look much closer to see if you are trying to expense things which don't qualify. This is especially true if you operate from your residence or use a personal vehicle (as in "you sell digital downloads but you claim $20,000 in automobile expenses?").
Unless by some miracle (and an incredibly small and simple business) the auditor will want to return to examine all the documentation once it has been complied, this could take 1 or 2 days or 1 or 2 weeks all depending on the complexity and quantity of the material.
Most important, you can ALWAYS say "I'll have to find those files" or "I need to ask my bookeeper/accountant" of course you MUST come through with the answers as promised or you will have trouble.
Ben
Thanks Ben.
Yes, it's a sole proprietorship, yes it's operated out of my home.
Unfortunately, my bookkeeping hasn't been the best, so I fear I'm in for it. Not that I was trying to cheat, just haven't kept the best track of expenses, etc. And, I'm finding that some older files I need are no longer on-line (2001/2002) so it's not going to go well.
Yes, it's a sole proprietorship, yes it's operated out of my home.
Unfortunately, my bookkeeping hasn't been the best, so I fear I'm in for it. Not that I was trying to cheat, just haven't kept the best track of expenses, etc. And, I'm finding that some older files I need are no longer on-line (2001/2002) so it's not going to go well.
Probably not for long. What with the new fee increases, decreased sales, increased postage etc, I'll probably have to find a new line of work.
This audit will be the death of me.
This audit will be the death of me.
I thought the same thing. Seems AWFULLY coincidental, doesn't it?
I too need a new computer, this one is crawling at a snails-pace.
I too need a new computer, this one is crawling at a snails-pace.
