CRA Non-Profit Organization Audit — Montreal CPA Firm Near You: NPO Tests

A CRA Non-Profit Organization (NPO) Audit examines whether an organization truly operates for non-profit purposes and not for the personal benefit of its members. CRA and Revenue Québec auditors carefully assess revenues, surpluses, distributions, and member benefits to ensure compliance with section 149(1)(l) of the Income Tax Act. Mackisen CPA Montreal provides full audit defense, compliance reviews, and accounting structuring to protect NPOs from losing their exemption or being reassessed retroactively.

Legal Foundation

Law: Income Tax Act s.149(1)(l) — exempts non-profit organizations that operate exclusively for social welfare, civic improvement, pleasure, recreation, or any purpose except profit.
Jurisprudence: Tourism Industry Association of Canada v. The Queen (1994 TCC) — clarified that incidental profits do not disqualify an organization if they are reinvested in non-profit objectives.

Why You Need a CPA for an NPO Audit

NPO audits go beyond financial accuracy—they assess intent, purpose, and governance. CRA and ARQ auditors evaluate whether the organization accumulates excessive surpluses, distributes income to members, or engages in commercial activities that compete with for-profit entities. A CPA ensures your organization’s structure, policies, and financial statements clearly demonstrate non-profit purpose.

Mackisen CPA Montreal develops NPO-compliance accounting systems that satisfy both CRA and Revenue Québec standards, ensuring transparency, accountability, and continued exemption.

Learning insight: The difference between a non-profit and a taxable business lies not in the numbers, but in the narrative. A CPA ensures your story aligns with your mission and the law.

What Mackisen CPA’s NPO Audit Defense Includes

• Full review of financial statements, bylaws, and membership policies.

• Evaluation of retained earnings and reserve accumulation for reasonableness.

• Documentation proving that all profits are reinvested into the organization’s objectives.

• Review of member benefits, reimbursements, and related-party transactions.

• Representation before CRA and ARQ during compliance verification.

Learning insight: CRA does not object to efficiency—it objects to distribution. NPOs must show that every dollar of surplus serves the mission, not individuals.

Common Triggers for NPO Audits

• Large or recurring annual surpluses.

• Significant fundraising revenue from commercial operations.

• Compensation to board members or related parties.

• Incomplete or inaccurate T1044 (Information Return for NPOs).

• Member rebates or reimbursements that resemble profit distributions.

Mackisen CPA proactively monitors these red flags and prepares proper documentation to prevent revocation or reassessment.

How Mackisen CPA Manages NPO Audits

1. Conducts a pre-audit diagnostic to test compliance with section 149(1)(l).

2. Prepares detailed income and expense allocations consistent with non-profit purpose.

3. Reconciles CRA’s and ARQ’s interpretation of incidental business income.

4. Drafts a compliance memorandum explaining the organization’s social, educational, or charitable mission.

5. Submits professional responses to auditor questions with legal and financial proof.

Learning insight: The best way to win a CRA audit is to demonstrate integrity and governance. A CPA doesn’t just defend numbers—they defend purpose.

Benefits of Professional Representation

• Maintains non-profit tax-exempt status.

• Prevents retroactive reassessment and interest charges.

• Strengthens donor and government confidence.

• Improves transparency and accountability.

• Ensures accurate annual T1044 and CO-17.SP filings.

Learning insight: A compliant NPO is more than audit-proof—it’s grant-ready. Donors and funders trust organizations that prove compliance through CPA review.

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Learning insight: CRA and ARQ recognize compliance through consistency. Mackisen CPA builds the systems that make that consistency visible.

Real Client Success

• A community organization retained its NPO status after CRA questioned large annual surpluses; Mackisen CPA demonstrated that funds were earmarked for future programs.

• A recreational club avoided tax reassessment when our team proved its incidental business revenue directly supported non-profit activities.

• A foundation corrected years of filings after we rebuilt T1044 schedules and submitted a compliance report accepted by CRA.

Why Mackisen CPA Montreal

With 35 years of combined experience in non-profit and charitable accounting, Mackisen CPA Montreal helps organizations maintain tax-exempt status through clear reporting, legal accuracy, and proactive governance advice.

Learning insight: The most successful non-profits treat compliance as part of their mission. Mackisen CPA helps you achieve that alignment—transforming compliance into credibility.

Learning conclusion: A CRA Non-Profit Audit is not just about proving where money goes—it’s about proving why. With Mackisen CPA Montreal, your purpose and compliance become inseparable.