Income Tax Audit Manual

Compliance Programs Branch (CPB)

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Chapter 6.0 Organization of the Audit Division in the tax services office

Table of Contents

• 6.1.0 Introduction
• 6.2.0 Organization of the audit team
  • 6.2.1 Specialty sections
• 6.3.0 Assistant director - Audit
  • 6.3.1 Overview
  • 6.3.2 Responsibilities of the assistant director - Audit
  • 6.3.3 Relationship with taxpayers and their representatives
  • 6.3.4 Special assignments
• 6.4.0 The audit manager
  • 6.4.1 Overview
  • 6.4.2 Responsibilities of the audit manager
• 6.5.0 The team leader
  • 6.5.1 Introduction
  • 6.5.2 Responsibilities of the team leader
  • 6.5.3 The team leader and effective work relationships
  • 6.5.4 The team leader's role in file selection and risk assessment
  • 6.5.5 Assigning workload
  • 6.5.6 Assessing auditor performance and training needs
  • 6.5.7 On-site visits by the team leader
  • 6.5.8 Team leader participation in the final interview
  • 6.5.9 Team leader's review of audit files – Under review
• 6.6.0 The Computer Audit Specialist
  • 6.6.1 Introduction
  • 6.6.2 Organization of the Computer Audit Specialists
  • 6.6.3 Responsibilities of the Computer Audit Specialist
• 6.7.0 The auditor
  • 6.7.1 Introduction
  • 6.7.2 Responsibilities of the auditor
  • 6.7.3 Performance review
  • 6.7.4 Auditor training and development
• 6.8.0 Role of the audit support team
  • 6.8.1 Functions of the information systems coordinator

6.1.0 Introduction

This chapter is an overview of the roles of the assistant director - Audit (ADA) and audit manager and describes the roles of the team leader, auditor, and audit support employees. Specific policies, procedures, and technical information are provided elsewhere in the Income Tax Audit Manual.

The structure of the Audit Divisions varies due to the size of the tax services office (TSO) and the geographic location. The organization and management structure of the Audit Division depend on the:

• number of positions allocated;
• special audit sections;
• number of audit teams;
• number of auditors in each team; and
• operational needs of the particular TSO.

The positions in the Audit Division include:

• assistant director – Audit;
• audit manager;
• administrative support employees;
• team leader;
• large file case manager;
• auditor;
• real estate appraiser; and
• valuator.

The individual job descriptions provide the specific responsibilities of the positions in the Audit Division. The employee should be given a copy of their job description and be familiar with their duties and responsibilities.

6.2.0 Organization of the audit team

Generally, the audit team will include income tax auditors at the SP and AU levels, although some TSOs may organize specific audit teams, such as SP stand-alone teams.

Each level of auditor is assigned audits according to their responsibilities and job description.

6.2.1 Specialty sections

When possible, the audit teams should specialize in audits of specific industry sectors based on local requirements. The TSO must ensure that audit coverage follows the program workplans as closely as possible.

Some Audit Divisions may also have audit teams organized by specialty, such as:

• aggressive tax planning;
• estates and trusts;
• international;
• non-residents; and
• underground economy (teams are sometimes regionalized).

Office Audit teams generally conduct desk reviews.

6.3.0 Assistant director - Audit

6.3.1 Overview

The assistant director - Audit (ADA) reports to the director of the TSO and is a member of the TSO senior management team.

6.3.2 Responsibilities of the assistant director - Audit

The Compliance Programs Branch (CPB) in Headquarters establishes the compliance program priorities outlined in their Program Business Plans based on the Corporate Business Plan. For more information, visit Summary of the Corporate Business Plan.

Established on the Program Business Plans, operating budgets and annual workplans are negotiated with and approved by Headquarters to ensure goals match nation-wide compliance programs. The ADA liaises with CPB and informs the director of the TSO, who communicates with the region.

To manage and deliver the division’s audit programs, the ADA:

• carries out the duties assigned by the director of the TSO;
• approves the division’s operating guidelines;
• manages the resources of the Audit Division; they:
  • administer the operating budget;
  • plan, assign, and monitor the progress of the annual workplans;
  • establish an effective organizational structure;
  • ensure that the division is properly staffed; and
  • report the progress of the workplans to the director, region, and Headquarters.
• ensures effective communication within the division;
• ensures that the division follows the confidentiality and security guidelines for taxpayer files;
• assists and guides audit managers and other employees in the division;
• provides assistance and support in resolving complex cases;
• ensures that adequate levels of training are provided to employees;
• ensures that the performance management process is completed for all employees; 
• prepares Form Y280, Employee Performance Management Report, for those who report directly to them; and
• administers collective agreements as well as Canada Revenue Agency (CRA) policies on work relations, human resource management, employment equity, and official languages.

6.3.3 Relationship with taxpayers and their representatives

The ADA informs and consults taxpayers and their representatives on policies, procedures, and practices to address issues about assessments and other serious concerns.

The ADA deals with members of parliament and the representatives of various groups and associations and provides the CRA's position on tax auditing at symposiums and meetings. Other than CRA employees, these meetings include members of the public, particularly accountants, tax practitioners, and lawyers.

6.3.4 Special assignments

As well as their principal responsibilities, the ADA receives special assignments and projects and may:

• participate as a board member in selection processes;
• participate as a member on local, regional, or national committees; and
• be temporarily promoted as director when the TSO director is absent.

6.4.0 The audit manager

6.4.1 Overview

The audit manager reports to the ADA and manages the activities of one or more programs in the Audit Division. The manager's role and responsibilities vary depending on the structure of the TSO and the responsibilities assigned by the ADA. In larger TSOs, the manager may be responsible for a single program, while smaller TSOs may not have an audit manager.

6.4.2 Responsibilities of the audit manager

The audit manager:

• prepares the annual workplans for the programs assigned;
• administers the assigned portion of the operating budget;
• assists with staffing processes within the division;
• liaises between the team leaders and the ADA;
• ensures that the confidentiality and security guidelines for taxpayer files are followed;
• ensures that team leaders have adequate training;
• assists and guides team leaders and other employees in the division;
• provides assistance and support in resolving complex cases;
• reviews audits that have issues identified by Audit Quality Review (AQR);
• informs and consults taxpayers and their representatives on policies, procedures, and practices to resolve issues about assessments and complaints;
• ensures that team leaders provide adequate training opportunities for their employees and that exceptional work is recognized;
• prepares Form Y280, Employee Performance Management Report, for those who report directly to them;
• administers collective agreements as well as CRA policies on work relations, human resource management, employment equity, and official languages;
• represents the CRA at meetings, symposiums, or seminars, as a participant or a speaker;
• represents the ADA in dealings with Headquarters when necessary; and
• acts for the ADA when necessary.

6.5.0 The team leader

6.5.1 Introduction

The role and responsibilities of the team leader may vary from one TSO to another, depending on the organization of the Audit Division, team size, and specific audit area.

The team leader works under the general direction of the audit manager or the ADA and receives information and guidance on:

• work priorities designed to meet objectives of the Audit Division;
• requesting files from Business Intelligence for the different levels of auditors; and
• possible adjustments to the workplans to maintain a balance in audit programs.

The team leader must communicate the team's progress and significant issues to management as they happen. Management directs and advises when necessary to help improve the team's performance.

6.5.2 Responsibilities of the team leader

The team leader manages a team of auditors responsible for ensuring taxpayer compliance with the provisions of all legislation administered by the CRA. The team leader directs the audit team so that their responsibilities are performed as efficiently and effectively as possible. The success of the Audit Division depends largely on the effectiveness of the team leader and the auditors.

The team leader must keep current on policies, procedures, and technical applications and ensure that team members know where to find the information needed for their work and are given the necessary tools.

If the application of a policy or law is unclear, the team leader may request technical assistance from Headquarters; go to September 27, 2012, memorandum, Headquarters Technical Support Program for Small and Medium Business Audit.

The team leader:

• ensures that the team contributes to the overall mandate of the CRA
• supports and promotes decisions by local management on internal CRA directives and policies
• ensures that the confidentiality and security guidelines for taxpayer files are followed
• ensures that the team's workload is completed within the established budget guidelines and reviews unusual situations
• ensures that new team members are introduced to the other team members and receive the necessary guidance and training
• provides team members with the provisions of the collective agreements;
• ensures that team members are not placed, and do not place themselves, in situations that involve personal risk; go to:
  • Security Volume
  • September 8, 2014, memorandum, Auditor Safety in the Field – Requesting personal protection from local police authorities
  • Procedures in Response to Workplace Violence
• requests workload from Business Intelligence (BI), taking into consideration the experience of team members and management priorities
• monitors the performance, workload, and conduct of each team member and suggests corrective action where necessary
• works with Quality Assurance (QA) to identify problem areas and training requirements for employee development
• encourages team members to improve their knowledge and abilities whenever possible
• assesses the work and performance of team members and provides timely feedback that emphasizes achievements and enables team members to meet their personal goals
• prepares Form Y280, Employee Performance Management Report, for those who report directly to them
• establishes and maintains effective working relationships
• ensures tactful interaction with taxpayers
• exercises delegated authority, if applicable, for financial, administrative, and human resources
• recommends the approval of overtime and approves leave, substitution (compressed work) schedules, and travel

6.5.3 The team leader and effective work relationships

The team leader plays a vital role on the Audit Division management team, as on the audit team. The team leader's effectiveness depends on establishing productive working relationships with:

• the audit manager and ADA;
• other team leaders and managers in the TSO;
• the Business Intelligence (BI) team;
• the Quality Assurance (QA) team; and
• their audit team.

The team leader works as a member of a team with the other team leaders. When directing the audit team members, the team leader must be aware that the need for independence and responsibility varies from one team member to another. The team leader must determine the team members’ interest in assuming more decision-making responsibility and complex audit situations and let them handle the situations that their knowledge and experience allow.

To encourage effective working relationships, the team leader:

• fosters an atmosphere of trust and cooperation between team members, management, and employees in other divisions;
• ensures that, as much as is in their control, the team members are given the opportunity to receive some satisfaction from their work;
• communicates effectively with the team to ensure that each team member is informed about issues involving policies, procedures, programs, and priorities;
• schedules team meetings to promote sharing of best practices among the team members;
• meets with team members one-to-one promoting open, two-way communication; and
• motivates the team towards accomplishing the division’s goals and objectives.

6.5.4 The team leader's role in file selection and risk assessment

The team leader requests audit cases from the Business Intelligence (BI) team. The audit cases are assigned directly to the auditor. The team leader ensures that the auditor verified the screener’s comments and that the risk was audited and approves the audit.

6.5.5 Assigning workload

The team leader must periodically review the workload of the team members to ensure that the work is being handled efficiently and effectively. Audit files assigned by BI should be based on the auditor's level (that is, SP-5, AU-1, AU-2, or AU-3) and their experience.

6.5.6 Assessing auditor performance and training needs

The team leader assesses auditor performance for training requirements, future assignments, and to provide guidance where necessary.

At the beginning of each Employee Performance Management cycle, the team leader sets performance expectations, in collaboration with the employee. The team leader meets with individual team members to discuss and identify their learning needs in relation to performance expectations set for the performance period and to determine their Individual Learning Plan (ILP). The team leader reviews and approves the ILP as part of the performance cycle.

Mandatory mid-cycle reviews require managers to have a performance discussion with their employees mid-way through the performance cycle and update employees’ performance reports with the outcomes of those discussions.

For more information, go to Performance management.

6.5.7 On-site visits by the team leader

Team leaders should visit their team members in the field on a regular and routine basis. The team leader should schedule on-site visits to the taxpayer in cooperation with the team member to ensure that the time and place are agreeable for all.

The auditor should inform the taxpayer in advance of the team leader's visit to explain the purpose of the visit and to discuss any concerns. Assure the taxpayer that on-site visits by team leaders are a common practice and that their purpose is to observe the auditor in the field.

An on-site visit can be particularly beneficial when there are concerns, such as working at the taxpayer's residence. The frequency of on-site visits should be determined based on the experience of the auditor and the specific situation.

On-site visits allow the team leader to:

• meet with the taxpayer or representative and discuss the audit;
• deal with any concerns or complaints expressed by the taxpayer;
• review the Audit Plan in connection with the records available and issues identified to the date of the visit;
• ensure that the auditor has requested all the required records and is provided access to those records;
• review the working papers, schedule, and notes prepared by the auditor and to suggest amending the Audit Plan where necessary within the context of the audit in process;
• observe the auditor at the taxpayer's place of business;
• observe how the auditor interacts with the taxpayer;
• assess the auditor's knowledge of accounting systems;
• determine how effective the auditor is in obtaining information from the taxpayer and in maintaining control of the audit; and
• help solve problems and identify issues that may help to reduce overall audit time.

6.5.8 Team leader participation in the final interview

If necessary, the team leader should attend the final interview with the taxpayer or their representative when significant changes or complex or controversial issues are identified.

For more information, go to 11.2.5, Final interview/meeting.

6.5.9 Team leader's review of audit files – Under review

The team leader reviews the audit file to ensure that the quality and scope of the audit work is complete and that supporting documents are available for any adjustments. The team leader must also review the file to ensure that CRA policies and procedures were followed.

A team leader’s signature must mean that they agree with and acknowledge the content of the reports they sign. The team leader’s final signature indicates an audit case meets established policy, as well as procedural and legislative standards in all material respects.

When an audit file is returned to the team leader from Quality Assurance, the team leader must ensure that corrections are made or take the appropriate action to address the items noted by Quality Assurance.

The extent of review of an audit file depends on the:

• auditor’s experience and abilities;
• team leader's knowledge of the case as a result of participation;
• complexity of the case;
• audit scope;
• type of adjustments proposed;
• need to assess the auditor's performance;
• quality of planning carried out by the auditor and how the auditor's time was spent;
• quality of research done by the auditor and the conclusions reached;
• discussions and proposals relating to an adjustment;
• requesting technical assistance from Headquarters;
• compliance with the CRA's policies and procedures; and
• Audit Report and working papers.

The team leader's review of audit files ensure the:

• Audit Plan was appropriate and included specific audit procedures based on the reason for the audit;
• information and documents obtained from the taxpayer were relevant to the audit and the reason for the audit;
• audit file was well documented and organized;
• audit was completed without undue delay, or if it was delayed, then consideration was given to proactive taxpayer relief; and
• referrals were prepared when required.

6.6.0 The Computer Audit Specialist

6.6.1 Introduction

This section is an overview of the duties and responsibilities of the Computer Audit Specialist (CAS).

CAS positions in the TSOs are at the AU-2, AU-3, and AU-4 levels. The number and level of CAS in each TSO depends on the needs of the TSO.

6.6.2 Organization of the Computer Audit Specialists

The organization of the CAS group or section varies from one TSO to another. When warranted, the CAS are organized into one or more teams reporting to CAS team leaders who direct the team. In larger TSOs, the CAS team leaders report to a manager of audit specialties. In other TSOs, the CAS team leaders report to an audit manager, a team leader, or directly to the ADA.

6.6.3 Responsibilities of the Computer Audit Specialist

Under the direction of the CAS team leader or other supervisor, the CAS advises and assists auditors to analyze and resolve complex issues relating to the many acts administered by the CRA when e-commerce and electronic accounting systems are used.

The CAS:

• interacts with senior accounting personnel, tax specialists, systems and management personnel of corporations and their representatives to clarify the taxpayer's obligation to retain records and provide copies of electronic records for a computer-assisted audit (CAA) under the statutes administered by the CRA;
• interprets audit requirements in relation to the full range of accounting systems and the hardware and software configurations to ensure accurate and complete data is delivered to the auditor;
• provides service to auditors to assist in efficiently achieving the audit objectives in a timely and cost effective manner; and
• exchanges information with the Computer Audit Specialist Division and with other TSO Computer Audit Specialist Sections about developments in e‑commerce, accounting systems, microcomputer and mainframe technologies.

6.7.0 The auditor

6.7.1 Introduction

This section is an overview of the auditor's role in the Audit Division. The information helps to increase the auditor's understanding of their role in the organization.

Auditors are assigned to a team to work under the direction of the team leader.

6.7.2 Responsibilities of the auditor

The auditor conducts quality audits to determine the degree of the taxpayer's compliance under the acts administered by the CRA and to make the necessary adjustments when non-compliance is noted.

The auditor:

• ensures that the legislation administered by the CRA is applied fairly and transparently;
• performs audits of taxpayers under the Income Tax Act, independently or as a member of a team, according to the mandate of the Audit Division and CRA policies, procedures, and values;
• monitors their workload and completes audit files without undue delay;
• provides information to the taxpayer during the audit and ensures that the taxpayer is aware of their rights and obligations;
• explains to the taxpayer how they can provide their books and records electronically to the CRA;
• identifies areas where training would be helpful and communicates this need to the team leader;
• communicates with the team leader any significant issues that occur during the audit; and
• represents the CRA in a professional and courteous manner.

For more information, go to:

• Taxpayer Bill of Rights; and
• 4.0, Auditor's standard of conduct, authorities, and responsibilities.

Auditors should attempt to resolve issues regarding the application of the Income Tax Act by completing their own research. After the auditor has discussed the issues with the team leader, they may wish to contact one of the officers in the Small and Medium Enterprises Directorate (SMED) Technical 1 and 2 Section in Headquarters, by telephone or email, to discuss issues informally and to obtain guidance regarding additional information they may need.

Auditors can request, through their team leader, formal assistance from the SMED Technical 1 and 2 Section for the complex issues arising from their audit after their research is done, and they have established a preliminary opinion on how to treat the transaction or issue. For procedures on how to obtain income tax assistance from the SMED technical support teams, go to September 27, 2012, memorandum, Headquarters Technical Support Program for Small and Medium Business Audit.

6.7.3 Performance review

The performance review is a tool used to help strengthen the auditor's performance. Communication should be open and ongoing between the team leader and the auditor.

To prepare for the performance review, the auditor should:

• participate in setting goals for the review period;
• estimate results and accomplishments expected during the review period;
• comment on any aspects that may impede or enhance performance;
• prepare questions to discuss with the team leader;
• make note of any administrative matters that may be causing a problem; and
• discuss training and development opportunities.

6.7.4 Auditor training and development

As a member of the audit team, the auditor acquires and maintains the knowledge and skills necessary to effectively accomplish assigned duties. The auditor must determine the areas where skills and knowledge could be improved through discussion with the team leader. The CRA offers several developmental programs and encourages auditors to request and participate in training, as available.

The Income Tax Audit Manual contains the policies, procedures, and technical information approved by CPB. Auditors must be familiar with the Income Tax Audit Manual and use it as a tool to help complete their tasks efficiently and effectively.

6.8.0 Role of the audit support team

The audit support team help the Audit Division meet its objectives. They process assessments and reassessments and administer the Audit Information Management System (AIMS). The structure of the support team depends on the specific needs of the TSO, but usually includes an information systems (or AIMS) coordinator and an Integras coordinator.

6.8.1 Functions of the information systems coordinator

The audit support team, including the information systems coordinator, ensures that income tax audit reassessments are processed accurately and on a timely basis. T1 returns are reassessed online, referrals are created and forwarded to the TC for reassessment. Corporate reassessments (Form T99A, T2 Tax Calculation Information Sheet) are attached to the T2 return and forwarded to the appropriate TC for processing.

For more information, go to 11.10.1, Routing of completed audits.