Income Tax Audit Manual
Compliance Programs Branch (CPB)
Information
This chapter was last updated in January 2026.
Disclaimer for external readers
The Income Tax Audit Manual (ITAM) has been prepared by the Canada Revenue Agency (CRA) to serve as an internal resource primarily for CRA auditors conducting income tax audits of small and medium sized businesses. It is not an exhaustive document. It outlines general guidelines and procedures designed to support a consistent approach as much as possible when performing Income Tax audits, and is subject to ongoing revision and updates.
CRA auditors are expected to exercise professional judgment and adapt their approach based on the specific facts and circumstances of each case. As such, not all provisions or procedures outlined in this manual will apply to every audit. Departing from one or more of these guidelines does not, in itself, invalidate the audit findings, nor the assessments or reassessments that are subsequently issued based on those findings.
To support government accessibility and transparency, the ITAM is publicly available in a version where only links to publicly accessible web pages remain active, ensuring secure and open access to relevant information. The information contained in this manual is provided for informational purposes only and should not be considered legal advice or a binding authority.
If a taxpayer disagrees with a reassessment, they retain the right to file a notice of objection within the applicable statutory deadlines. This process ensures that taxpayers have an opportunity to seek recourse through established procedural channels in which the Appeals Branch will conduct a fair, complete, and impartial review.
Chapter 1.0 The Income Tax Audit Manual – Organization, purposes, and uses
Table of Contents
- 1.1.0 Acknowledgements
- 1.2.0 Background
- 1.3.0 Sources of information for the ITAM
- 1.4.0 Intended users
- 1.5.0 Scope and authority
- 1.6.0 Maintenance of the ITAM
- 1.7.0 Organization of the ITAM
- 1.8.0 Updates
- 1.9.0 Recommending changes or additions to the ITAM and letter templates
- 1.11.0 Accessing the ITAM
1.1.0 Acknowledgements
The Compliance Programs Branch recognizes the hard work by subject matter experts and the support of management from the tax services offices in developing and maintaining this manual.
1.2.0 Background
The Income Tax Audit Manual (ITAM) consolidates operational policies and procedures for the administration of income tax.
The material in the ITAM reflects national audit policies and recommended procedures. Communiqués, directives, and policy statements will be archived for reference when out of date or cancelled when superseded by new policy or legislation.
The unsevered ITAM is available to Canada Revenue Agency (CRA) auditors in the CRA Electronic Library. For more information, go to 1.10.0, The CRA Electronic Library.
The severed ITAM is available to the public on the Canada.ca website at Income Tax Audit Manual.
Printing the ITAM is not recommended.
1.3.0 Sources of information for the ITAM
The Income Tax Audit Manual (ITAM) includes information from communiqués, directives, memoranda, and policy statements.
1.4.0 Intended users
The ITAM is written for employees involved in the audits of income tax for small and medium-sized businesses; however, the information can also be applied in other areas such as large business and specialty audit.
1.5.0 Scope and authority
The contents of the ITAM reflect the national policy on operations, procedures, and technical applications as authorized by the program areas and the Policy Section within the Small and Medium Enterprises Directorate (SMED).
The ITAM is a single source of reference for audit policies and procedures, and technical application guidelines about audit issues. To conduct research efficiently and effectively, use the ITAM search system to access information to plan, prepare, conduct, and complete an audit. The ITAM includes:
- examples of audit checklists
- audit techniques
- technical information to apply legislation administered by the CRA
- references to court cases
1.6.0 Maintenance of the ITAM
The Policy Section of the SMED ensures common audit issues are addressed consistently.
1.7.0 Organization of the ITAM
A Table of Contents at the beginning of the ITAM lists the chapters, with links activated to each chapter. The ITAM is organized in two sections.
Section I - Audit policies and procedures
- Chapter 0 – What’s New
- Chapter 1 – The Income Tax Audit Manual – Organization, purposes, and uses
- Chapter 3 – Taxpayer rights and taxpayer relief
- Chapter 4 – Auditor's standard of conduct, authorities, and responsibilities
- Chapter 6 – Organization of the Audit Division in the tax services office
- Chapter 8 – Business Intelligence
- Chapter 9 – Audit planning and preparation
- Chapter 10 – Conducting the audit
- Chapter 11 – Completing the audit
- Chapter 12 – Specific audit guidelines and checklists
- Chapter 13 – Audit techniques
- Chapter 15 – International audit issues
- Chapter 16 – Clearance certificates
- Chapter 17 – Estates and Trusts
- Chapter 19 – Objections and appeals
Section II - Technical issues
- Chapter 20 – Valuation of inventory
- Chapter 22 – Elections, designations, and discretion
- Chapter 24 – Transactions involving related persons, corporations and shareholders, dividends, etc.
- Chapter 27 – Income
- Chapter 28 – Penalties
- Chapter 29 – Losses
Chapters 2, 5, 7, 21, 23, 25, and 26 are available for future use.
1.8.0 Updates
1.8.1 What's New
"What’s New" in the Compliance Programs Branch Reference Material lists updates to the CRA Electronic Library every two months, including communiqués, memoranda, letter templates, revised sections of the ITAM, and other operational manuals.
Communiqués, memoranda, and letter templates can be viewed directly under “Audit” by expanding (click the + sign) the section.
When a section of the ITAM is updated, the section reference is included in the listing under Operations Manuals > Audit Manuals > Income Tax Audit Manual. Within the chapters, updated text is marked with a sidebar, which is removed in the next publication.
The ITAM is published every two months and there are always changes as the Policy Section updates for policy changes, legislative changes, broken or outdated links, and language clarity.
"Corrected text" normally means corrected grammar, or spelling errors, or to make the French and English text mean the same.
"Clarified text" normally means that the phrasing has changed, or an additional line of explanation has been added. The meaning of the text remains the same, but it may now be clearer for some.
Most other changes are clearly described as to what the change was.
For more information on revisions, email Income Tax Audit Manual / Manuel de la vérification – Impôt (CRA/ARC).
1.9.0 Recommending changes or additions to the ITAM and letter templates
The ITAM and letter templates are regularly updated. Comments and suggestions for improvement are welcome.
Please email all recommendations and suggestions to Income Tax Audit Manual / Manuel de la vérification – Impôt (CRA/ARC).
1.11.0 Accessing the ITAM
The CRA version of the electronic library houses the ITAM and includes a comprehensive coverage of income tax, excise tax, GST/HST, provincial taxes, and customs information, as well as links to other tax-related information.
The CRA version of the electronic library can be accessed through the Centralized Technology Platform (CTP) or the Local Area Network (LAN). The use of the CTP ensures the user access to the most recent information.