Arguably, the cheapest, fastest, and dirtiest way in which the
CRA can audit a taxpayer is by employing the "net worth"
method. It throws all principals of good audit practice to the wind
and allows the auditor to essentially go freestyle. And it results
in reassessments. Lots and lots of huge, unfair reassessments. And
no CRA auditor was ever fired for coming back to the office with
lots and lots of huge reassessments. Never. And as an auditor, it
is better to err on the side of caution. Plus, if the taxpayer
disagrees with the reassessment, they can go ahead and object. And
if they lose their objection, they can always appeal to the Tax
Court of Canada.
And so begins the sad story in which much of the cost of
performing an audit is actually passed from the government to the
taxpayer.
