Most business owners don’t think about audits until someone brings it up.

It’s usually not something you plan for in advance. More often, it comes up mid-conversation. A lender asks for it. An investor mentions it. Or you’re in the middle of something important and suddenly someone says, “We’ll need audited financials.”

And then you’re left wondering… do I actually need this, or is this just being suggested?

The honest answer is, it depends. In Canada, audits aren’t automatically required for every business. A lot comes down to who’s involved and what the situation is.

When is an audit actually required in Canada?

There isn’t a single rule that covers everyone.

An audit becomes required when something triggers it. That “something” is usually one of the following:

• • a legal requirement

• • a lender condition

• • a shareholder decision

• • or a funding agreement

If none of those apply, you might not need an financial audit at all.

This is where people get tripped up. There’s this assumption that audits are standard every year. For many private businesses, that’s simply not true.

Do corporations in Canada need audits every year?

Not always, and this surprises a lot of people.

Private corporations can often skip an audit if all shareholders agree to it. That decision is usually made each year.

In smaller companies, especially where the owners are also running the business, this is pretty common. Everyone already has a good sense of what’s going on financially, so an audit doesn’t add much.

But things shift once you bring in outside parties.

If there’s a lender involved, or new investors, or even just more shareholders, the expectation around financial reporting starts to change. At that point, audits become harder to avoid.

Can shareholders waive an audit?

Yes, but it has to be unanimous.

If even one shareholder wants audited financial statements, then the audit goes ahead. There’s no middle ground there.

Also, this only applies internally. If your bank requires audited statements as part of a loan, shareholder approval won’t override that.

So while waiving an audit is possible, it only works in certain situations.

Are non-profits required to have audits in Canada?

This one depends quite a bit on the size of the organization and how it’s funded.

Smaller non-profits often have more flexibility. They might not need an audit and can use a review engagement instead.

But once you’re dealing with:

• • higher revenue

• • government funding

• • or stricter regulatory oversight

audits become more likely.

If you’re part of a non-profit, this is one area where the details matter. The rules can vary depending on how the organization is set up.

Do partnerships need audited financial statements?

Most partnerships don’t.

Unless there’s something specific requiring it, like a lender or an agreement between partners, audits aren’t usually part of the picture.

A lot of partnerships stick with simpler reporting unless there’s a reason to go further.

That said, once things grow or more people get involved, expectations can shift here too.

Are audit requirements the same across Canada?

Not really.

There are federal rules, provincial rules, and then industry-specific requirements heaped on.

So the overall principle is the same, but the details may vary depending on where your firm is located and what kind of corporation it is.

This is why two organizations that appear similar from the outside may have distinct audit requirements.

Why do businesses and firms need to have audits?

Most of the time, it’s about trust.

If you’re running the small business and you’re using the numbers internally, that’s one thing.” But if you have other people counting on those figures, the expectations are different.

Think imagine a lender looking at your loan application. Or the investor wondering whether to put money into your business.

They’re not just looking at the numbers. They’re asking, how reliable are these numbers?

An audit helps answer that question.

Why do audits become more common as businesses grow?

Because things get more complicated.

More revenue. More transactions. More people involved.

At some point, it’s not as easy to keep everything informal. There’s more at stake, and more people depending on the financials.

That’s usually when audits start to make sense, even if they weren’t required before.

It’s less about ticking a box and more about keeping things solid as you scale.

Should you ever do an audit even if it’s not required?

Sometimes it’s worth thinking about.

If you’re planning something like:

• • bringing in investors

• • selling the business

• • or applying for larger financing

Having audited financial statements ready can make things smoother.

It’s not always necessary, but it can remove friction when timing matters.

So, when is an audit required in Canada?

If you strip everything down, it’s fairly simple.

You need an audit when:

• • you’re required to have one

• • or someone important to your business asks for it

If neither of those apply, you likely have some flexibility.

The difficult aspect isn’t just knowing where you are right now, it’s thinking about what might be coming next.

FAQs

In Canada, when is an audit required?

When it’s required by law, lenders, investors, or agreements tied to your business.

Do corporations in Canada require annual audits?

Not always. Many private corporations can waive audits if all shareholders agree.

Do non-profit organizations need to have audits?

It depends on their size, funding, and norms of governance.

Do partnerships need audited financial statements?

Usually not, unless required by agreements or external parties.

What are provincial audit requirements in Canada?

They vary depending on the province and the type of organization.

Can shareholders waive an audit requirement?

Yes, but only if all shareholders agree and there are no external requirements.

Why SRJ Assurance?

Most business owners don’t come to us with a clear question about audits.

They come with a circumstance that is not clear.

It’s our responsibility to help you figure out what genuinely relates to you without making it more complicated than it has to be.

We focus on practical advice, saving you unnecessary work today, while keeping you prepared for changing requirements tomorrow.

Not sure where your business is at? SRJ Chartered Professional Accountants assist you walk through it and help you make a call that makes sense.