{"id":9804,"date":"2024-10-18T16:00:37","date_gmt":"2024-10-18T20:00:37","guid":{"rendered":"https:\/\/www.spiegelsohmer.com\/?p=9804"},"modified":"2024-10-18T16:00:37","modified_gmt":"2024-10-18T20:00:37","slug":"the-use-of-an-indirect-audit-method-not-in-all-cases","status":"publish","type":"post","link":"https:\/\/spiegelryan.com\/en\/2024\/10\/18\/the-use-of-an-indirect-audit-method-not-in-all-cases\/","title":{"rendered":"The use of an indirect audit method: not in all cases!"},"content":{"rendered":"

In a recent case argued by the undersigned, Thibault v. Agence du revenu du Qu\u00e9bec<\/em>, 2024 QCCQ 5284<\/a>, the Court, under the pen of the Honourable Louis Riverin, confirms once again that the use of an indirect audit method, in this case a \u201ccash flow\u201d audit, is not appropriate in all circumstances. On the contrary, a \u201cbarrier to entry\u201d does exist for the recourse to such a method.<\/p>\n

As is well established, an indirect audit method is to be used as a last resort when the information provided by a taxpayer is unreliable or non-existent. Inaccurate or unrealistic statements, unreliable or deficient records, or a lack of cooperation may justify the use of such a method.<\/p>\n

However, it is up to the tax authorities to justify the use of an indirect audit method because a \u201ctraditional\u201d audit should always be preferred. This is where a \u201cbarrier to entry\u201d exists. The Agency cannot simply decide to use an indirect audit method without any justification.<\/p>\n

As pointed out by the Court (our translation from the French):<\/p>\n

50 The audit report does not relate any facts showing that Revenu Qu\u00e9bec was unable, even relatively, to carry out a direct and traditional audit. The testimonial evidence reveals no more. From the very first communication with Revenu Qu\u00e9bec, Mr. Thibault’s representatives established an ongoing dialogue with Revenu Qu\u00e9bec representatives, providing the requested information and supporting documents.<\/em><\/p>\n

51 At no time in this case did Revenu Qu\u00e9bec question the veracity of the information and amounts provided by the taxpayer and his representatives.<\/em><\/p>\n

52 The mere mention in the audit report that Mr. Thibault’s file had been selected by the specific \u201cwealth index\u201d program does not, in of itself, justify the use of an indirect cash flow method from the outset of the audit.<\/em><\/p>\n

Adding, moreover, that the reductions obtained throughout the process of contesting the reassessments issued were significant, such that the results from the application of the method were unreliable, the Court rightly decides to cancel this part of the reassessments issued against the Taxpayer.<\/p>\n","protected":false},"excerpt":{"rendered":"

In a recent case argued by the undersigned, Thibault v. Agence du revenu du Qu\u00e9bec, 2024 QCCQ 5284, the Court, under the pen of the Honourable Louis Riverin, confirms once again that the use of an indirect audit method, in this case a \u201ccash flow\u201d audit, is not appropriate in all circumstances. On the contrary, […]<\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[4,7],"tags":[],"class_list":["post-9804","post","type-post","status-publish","format-standard","hentry","category-business-law","category-taxation-law"],"acf":[],"yoast_head":"\nThe use of an indirect audit method: not in all cases! - Spiegel Ryan<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.spiegelsohmer.com\/en\/2024\/10\/18\/the-use-of-an-indirect-audit-method-not-in-all-cases\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The use of an indirect audit method: not in all cases! - Spiegel Ryan\" \/>\n<meta property=\"og:description\" content=\"In a recent case argued by the undersigned, Thibault v. Agence du revenu du Qu\u00e9bec, 2024 QCCQ 5284, the Court, under the pen of the Honourable Louis Riverin, confirms once again that the use of an indirect audit method, in this case a \u201ccash flow\u201d audit, is not appropriate in all circumstances. 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