To audit means to go through the process of examining and verifying a company's financial records and supporting documents.
While a business might go through an audit for any number of reasons, such as wanting to attract investors, get a loan, or sell the business, for many business people the word "audit" is welded to the words "income tax".
An income tax audit is an inspection and verification of a company's records and supporting documents conducted by a CRA (Canada Revenue Agency) auditor.
The CRA doesn't just conduct income tax audits, however; they perform audits of any CRA accounts, including auditing GST returns and claims for rebates.
According to the CRA's Guide For Canadian Small Businesses, an audit usually takes one to two weeks, and involves "an examination of your ledgers, journals, bank accounts, sales invoices, purchase vouchers, and expense accounts." They go on to point out that the audit process may involve touring your business premises, and seeking information and assistance from your employees.
As the CRA performs a certain number of audits each year to monitor compliance, it's wise to be certain that your business records are well-kept, complete, and always "audit-ready".
