CRA Small-Business Audit — Montreal CPA Firm Near You: Cash, COGS, and Owner-Draw Defense

A CRA Small-Business Audit targets owner-managed businesses where the agency suspects unreported income, overstated expenses, or inaccurate bookkeeping. These audits are common in sectors with high cash activity, fluctuating COGS, subcontractor payments, or informal recordkeeping. Mackisen CPA Montreal defends your file with structured evidence, reconciliations, and clear financial explanations to prevent reassessments or penalties.

CRA small-business audits are often triggered by industry benchmarks, third-party data, GST/HST filings, or mismatches between deposits and declared sales. Because small businesses often lack formal accounting systems, CRA assumes a high risk of underreporting unless proven otherwise.

Law: ITA s.231.1 gives CRA broad power to review books and records. ITA s.152(7) allows CRA to assess income “notwithstanding any return filed.”
Jurisprudence: Hickman Motors Ltd. (1997 SCC) confirms CRA may use indirect methods (bank deposit, markup, net-worth tests) when recordkeeping is incomplete.

Learning insight: CRA doesn’t penalize small businesses for being informal — they penalize them for being undocumented.

Why CRA Targets Small Businesses
CRA applies risk-scoring algorithms to identify files where declared numbers differ from expected business patterns. Common triggers include:
• high cash sales or inconsistent POS data
• deposits higher than reported revenue
• subcontractor invoices without T4A slips
• COGS too high or too low relative to industry benchmarks
• unexplained owner withdrawals
• recurring losses in a profitable sector
• large, round-number expenses without receipts
• lifestyle indicators that exceed reported income

Learning insight: CRA expects the business to prove its numbers match commercial reality. Even honest errors look like intentional underreporting if they aren’t documented.

What a Mackisen CPA Small-Business Audit Defense Includes
• full reconciliation of POS, bank deposits, merchant statements, and invoicing
• proof of source for every significant cash deposit
• COGS and purchase-to-sales ratio analysis with supplier confirmation
• reconstruction of missing receipts using secondary evidence
• adjusting entries to correct bookkeeping irregularities
• analysis of owner draws versus business expenses
• preparation of a complete CPA-certified audit binder
• direct communication with CRA officers to present evidence professionally

Learning insight: CRA changes its audit position when they receive a clear, structured, CPA-certified explanation. The earlier we intervene, the smaller the reassessment.

Frequent Issues Identified in Small-Business Audits
• unreported e-transfer income
• undeclared cash sales discovered through POS comparison
• inventory shrinkage without documentation
• mixing personal and business expenses
• subcontractor payments with no slips issued
• mileage claims without logs
• repairs classified as expenses instead of capital additions
• GST/QST credits claimed on ineligible invoices

Learning insight: Most small-business audit issues are not fraud — they are documentation gaps. We specialize in closing those gaps before CRA penalizes them.

The Legal and Educational Value
Income Tax Act s.231.1 allows CRA to demand records, and s.152(7) allows CRA to assess income if documentation is weak. Without a CPA-prepared defense, CRA’s assumptions often stand even if incorrect.
Hickman Motors (1997 SCC) confirms CRA may use indirect methods such as markup tests and bank deposit analysis, making CPA representation essential when recordkeeping is incomplete.

Learning insight: CRA’s assumptions become your tax bill unless your CPA replaces them with facts.

Real-World Success
• A contractor avoided a $47,000 reassessment after Mackisen CPA produced a complete POS-to-deposit reconciliation.
• A café passed a cash-intensive audit after we documented supplier shortages, spoilage, and delivery-app commissions.
• A self-employed professional avoided penalties when we proved e-transfer deposits were loan repayments, not income.

Learning insight: When CRA sees clear financial logic supported by CPA-verified documents, reassessments shrink — or disappear entirely.

SEO Optimization and Educational Value
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Why Mackisen CPA Montreal
With more than 35 years of combined audit, tax-law, and forensic-accounting experience, Mackisen CPA Montreal is recognized as a leading CPA firm for CRA small-business audits. We know the audit triggers, the ratios CRA uses, the questions auditors ask, and — most importantly — the evidence they accept. We deliver rapid, bilingual representation and complete audit-defense files for small businesses across Quebec.

Learning insight: A CRA small-business audit is not about fear — it’s about preparation. When your CPA controls the narrative, CRA respects your numbers.

Call to Action
If you received a CRA Small-Business Audit letter or risk-review notice, call us immediately before responding on your own.
Phone: 514-276-0808 | Email: info@mackisen.com | Website: mackisen.com

Learning conclusion: CRA small-business audits are predictable, preventable, and winnable when handled by experts. Mackisen CPA Montreal provides the documentation, strategy, and representation that transform an audit from a threat into a controlled, professional process.