CRA Small-Business Audit — Montreal CPA Firm Near You: Cash, COGS, Draws Under Control

A CRA Small-Business Audit is one of the most common yet misunderstood verifications conducted by the Canada Revenue Agency. It targets owner-managed businesses — from contractors and consultants to restaurants, clinics, and retail stores — to confirm that income, expenses, and shareholder draws align with actual operations.
Mackisen CPA Montreal provides professional audit representation and financial reconstruction services to ensure every dollar reported is traceable, defensible, and compliant with both CRA and Revenu Québec expectations.

Legal Foundation

Law: Income Tax Act s.231.1 (audit powers), s.152(1) (assessment authority), s.163(2) (gross negligence penalty).
Jurisprudence: Hickman Motors Ltd. v. Canada (1997 SCC) — the taxpayer bears the burden of proving that reported income reflects reality; Canderel Ltd. v. Canada (1998 SCC) — income must be determined using sound business principles.

Learning insight: CRA doesn’t just test numbers — it tests behavior. A professional file shows both accuracy and integrity.

Why CRA Targets Small Businesses

CRA audits small businesses because they often manage both personal and business transactions within the same bank accounts or records. Even honest errors can appear suspicious to algorithms.
Common triggers include:

• Cash-heavy operations (restaurants, retail, salons, contractors).

• Frequent shareholder withdrawals or inter-company transfers.

• Large expense claims (vehicle, meals, home-office, subcontractors).

• Negative net income or losses for multiple years.

• Inconsistent HST/QST filings versus income reported.

Learning insight: CRA’s systems don’t know your story — they only see ratios. Mackisen CPA tells your story through documentation and context.

CRA’s Small-Business Audit Process

1. Initial Contact: CRA issues an audit letter requesting ledgers, invoices, and bank statements.

2. Preliminary Review: CRA screens deposits, COGS ratios, and gross profit margins.

3. On-Site Verification: For cash-heavy businesses, auditors may visit your premises.

4. Variance Analysis: CRA compares results to industry benchmarks and your prior years.

5. Proposed Adjustment: CRA may suggest income additions or disallowed expenses unless documentation justifies them.

Learning insight: CRA’s adjustments are reversible — but only when your CPA responds with verifiable facts.

Mackisen CPA’s Small-Business Audit Defense Strategy

1. Cash Flow Reconstruction: Reconcile bank deposits, POS receipts, and supplier invoices to prove income integrity.

2. COGS (Cost of Goods Sold) Verification: Validate purchases and supplier relationships to confirm legitimate expenses.

3. Draws and Loans Analysis: Distinguish shareholder withdrawals, capital infusions, and inter-company transfers to avoid double taxation.

4. Expense Categorization Review: Ensure each deduction meets Income Tax Act s.18(1)(a) and CRA interpretation bulletins.

5. Audit-Ready Documentation: Present proof in CPA-certified format, using clear tables, invoices, and explanations.

Learning insight: When every number ties to a receipt, audit stress disappears. Mackisen CPA makes every number accountable.

Common CRA Adjustments in Small-Business Audits

• Disallowed vehicle or travel expenses without mileage logs.

• Reduced meals and entertainment deductions beyond 50%.

• Denied subcontractor payments without T5018 slips.

• GST/HST or QST input-tax-credit reversals on missing invoices.

• Income additions based on deposit analysis.

Mackisen CPA Montreal prevents these adjustments by pre-reconciling and validating evidence before the audit begins.

Learning insight: CRA disallows assumptions — but accepts documentation. Mackisen CPA ensures you provide documentation, not explanations.

Real-World Audit Success

• A construction business avoided a $95,000 reassessment when Mackisen CPA proved that “missing deposits” were inter-company transfers.

• A Montréal retailer passed a CRA audit with zero adjustments after our forensic team tied every supplier invoice to MEV-recorded sales.

• A self-employed consultant cleared a $12,000 deduction dispute when we reclassified legitimate client-travel costs and filed CRA’s T777 form.

Learning insight: The best audit defense isn’t emotional — it’s mathematical. Mackisen CPA turns stress into structure.

SEO Optimization and Learning Value

Primary Keywords: CRA Small-Business Audit, Mackisen CPA Montreal, CPA Firm Near You, CRA Cash Audit, CRA COGS Review, CRA Business Audit Help.
Secondary Keywords: CRA small business reassessment, CRA audit accountant Montreal, CRA bookkeeping verification, CRA business ratio analysis, CRA shareholder draw audit.

Learning insight: Google ranks trust — CRA audits test it. Mackisen CPA earns both through compliance clarity and expert representation.

Why CRA Small-Business Audits Are Increasing

CRA has invested heavily in artificial intelligence to compare data across:

• GST/HST filings vs. income tax filings.

• Bank-deposit patterns and payroll data.

• Supplier information shared through electronic matching.

• Lifestyle audits based on personal spending.

Learning insight: The algorithm catches irregularities — but your CPA proves why they’re legitimate. Mackisen CPA turns every algorithmic flag into a cleared file.

Why Mackisen CPA Montreal

Mackisen CPA Montreal brings over 35 years of combined audit, tax, and forensic experience. Our bilingual CPA team provides proactive defense for small businesses across Québec and Canada. We manage every communication with CRA, protecting your rights, privacy, and reputation while ensuring legal compliance.

Learning insight: CRA audits test your books — Mackisen CPA audits your defense. Together, we transform compliance into confidence.

Call to Action

If CRA or Revenu Québec has contacted you for a small-business audit, act before deadlines tighten. Early professional intervention prevents expansion and protects your cash flow.
Contact Mackisen CPA Montreal today for audit representation, CRA negotiation, or a pre-audit compliance check.
Phone: 514-276-0808 | Email: info@mackisen.com | Website: mackisen.com

Learning conclusion: A CRA Small-Business Audit is not a punishment — it’s a precision test. Mackisen CPA Montreal ensures your financial story passes with flying colors by turning every question into proof and every number into peace of mind.