There is no requirement for a corporation to have an audit performed in Canada, unless the corporation is a publicly traded corporation. However, often where there is third party financing, the lender will require the corporation to have an audit performed as a condition of the financing.
The Canadian tax system is based on self-assessment, also known as voluntary compliance. In general, every corporation is required to file a tax return. Once the tax return is processed, the tax authorities will issue a Notice of Assessment. When a return is assessed, the statute of limitations for the tax authorities to reassess (adjust) the tax return is normally between 3 to 4 years.
Routine audits are conducted by the Canada Revenue Agency to ensure tax compliance. Taxpayer’s are required to comply throughout the audit process. Taxpayers are required to keep adequate books and records to substantiate their financial records.