In a June 18, 2015 Technical Interpretation, CRA was asked about the perceived increase in requests of personal financial information of the shareholders of Canadian corporations selected for audit. Further, questions were asked with respect to information that is requested in relation to the shareholder’s spouse, children or other related parties. In some situations, the shareholders are asked to essentially complete statements of net worth.

CRA noted that the personal information from the shareholder and related parties is requested to ensure that business transactions are reported within the business and not in personal accounts. It was noted that internal controls and the segregation of duties are generally weak in some organizations. Therefore, indirect tests of income may be used to ensure the completeness of income reported. Indirect tests may include:
• bank deposit analysis;
• rough net worth calculations; and,
• analysis of sources and applications of funds.

CRA has confirmed that obtaining certain personal financial information for shareholders and their family living in the same household is a requirement in some small and medium enterprise audits.

Action Item: If such an audit request is received, contact us to help respond efficiently.

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