CRA Answers TEI’s Questions About Its New 'Risk-Based Audit Process'

 
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The Canada Revenue Agency has now published a set of answers to questions and concerns about the audit process presented to it by the Tax Executives Institute late last year (see our earlier blog post).

One of the highlights is the set of answers by the CRA to a series of questions about its new risk-based audit process.  The questions and answers on that subject are as follows:

Question 12 - Risk-based Audit Process

In 2011 CRA announced it was instituting a risk-based approach to audits whereby CRA would meet with senior representatives of the taxpayer to:

Explain the redefined risk-based approach to large business compliance and how the approach affects taxpayers; Share CRA's findings and observations noted during the taxpayer's risk assessment; and Understand how the taxpayer manages tax risk at its highest governance levels. With the first round of meetings with taxpayers complete, TEI has the following questions in respect of the approach:

  1. Would CRA share its general observations, findings, trends, or conclusions with respect to the state of tax-risk governance?

    Response by CRA:

    The Approach to Large Business Compliance is being phased in over a five-year period commencing in 2010-11. During this period, CRA officials conduct meetings with Large Business enterprises' senior executives to discuss tax compliance and risk of non-compliance associated with their business activities, governance regime, internal controls, and inherent and behavioral risk factors affecting their risk segmentation. At this point in time, it is still premature to draw general conclusions on the state of tax-risk governance. We have noted that there are taxpayers with no formal method of identifying and responding to corporate tax risk. These taxpayers are informed that this lack of tax risk governance, in the absence of other mitigating controls, will weigh negatively on their overall risk rating with the CRA.

  2. In the interests of transparency, will CRA consider publishing a document outlining and discussing its review and risk-assessment process?

    Response by CRA:

    The CRA is of the view that the success of the Approach to Large Business Compliance is based on a well-informed, transparent tri-partite relationship. Providing further information on the risk assessment process in a published document would be in the best interests of all parties. As this initiative unfolds, the CRA will be in a better position to further communicate the risk-assessment...

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