Magazine article CMA - the Management Accounting Magazine

Improving the Audit Process with Revenue Canada

Magazine article CMA - the Management Accounting Magazine

Improving the Audit Process with Revenue Canada

Article excerpt

Revenue Canada has recently introduced a new audit initiative designed to enhance its compliance relationship with large corporations. The purpose is to increase efficiency and create a more cooperative, open and transparent audit relationship. Participation is totally flexible and voluntary.

Revenue Canada will work with a corporation to jointly establish a written framework that will govern their relationship and the audit process. The protocol is not a legal document but an agreement of understanding between Revenue Canada and the corporation. Each protocol will be tailored to reflect the unique needs of individual corporations.

Participation in the protocol initiative is expected to:

* Enhance certainty - Under the initiative the Department and the corporation will establish annual or multi-year audit plans and the terms of reference for upcoming audits.

* Reduce error - With a written framework, tax issues will be identified earlier in the audit process thus reducing future errors and ensuring greater certainty regarding any tax liabilities.

* Generate faster audits - The protocol allows not only for complete audit years but also for audit compliance "check years." During these audit "check years," auditors will make greater use of statistical analyses for compliance verification. The intent is to review corporate records, much faster than during a complete audit year where records are covered in greater detail.

* Facilitate timely resolution - Certainty in the audit process, the option of real-time audits and a single point of contact in the Department for all issues will contribute to the early identification and resolution of audit issues.

* Save time and money - A quicker resolution of both past and current issues, and a quicker closing of audits will save time and costs through reduced interest charges, and should reduce the costs of storing records.

The key elements of a protocol are as follows:

1. A multi-year plan - The audit protocol covers a period of several years that is mutually agreed upon. This multi-year plan includes both complete audit years and audit compliance check years. Both parties will determine the commencement and scheduled completion dates for each audit.

2. An audit plan - Both parties will work cooperatively to develop an audit plan prior to the commencement of each audit. Some of the key issues could be:

* developing a flexible process for discussion and resolution of material compliance issues;

* providing a means to identify and resolve significant issues up front to reduce audit time;

* establishing time frames that can be revised if necessary;

* ensuring the audit team has the appropriate expertise for all audit activities;

* providing a commitment and a time frame to resolve any outstanding issues from previous audits. …

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