Introduction

An audit of a physician's medical professional corporation is not a random event. The CRA's audit selection process for professional corporations is increasingly data-driven — targeting corporations whose OHIP billing volumes do not match reported corporate revenue, whose compensation structures appear unusual, or whose expense deductions are significantly above industry norms.

Understanding what an auditor examines in a physician MPC audit — and what documentation is expected — is the best preparation for a process that can be managed effectively when approached correctly.

Scenario: Dr. Vasquez Receives an Audit Notification

Dr. Vasquez has been incorporated for seven years. Her MPC has been filing T2 returns annually with her accounting firm. In February 2026, she receives a letter notifying her that the CRA has selected her 2023 and 2024 T2 returns for a field audit.

The auditor's initial request list includes:

•  Corporate bank statements for both years

•  General ledger and trial balance

•  T4s and T4As filed

•  Shareholder loan account activity

•  Vehicle expense logs and insurance records

•  Home office documentation

•  Professional development and travel expense details

•  OHIP summary statements for both years

What the Auditor Is Specifically Looking For in an MPC

Revenue reconciliation: The auditor will compare OHIP payment summaries (which the CRA can obtain independently) against the corporate revenue reported on the T2. A gap — OHIP payments not appearing in corporate revenue — suggests either revenue that was redirected personally or an OHIP assignment documentation problem.

Shareholder loan account: The auditor will trace every debit and credit in the shareholder loan account across both years. Large, undocumented draws — particularly those not matched by salary or dividend declarations — are the most common finding. Any balance that exceeded the one-year repayment rule will be assessed as personal income.

Vehicle expenses: The auditor will ask for the vehicle logbook. Without a contemporaneous log showing business use percentage, the vehicle deduction claim is difficult to defend. An auditor who finds a 100% vehicle deduction claim with no logbook will typically allow 50% or less, based on the nature of the practice.

Home office expenses: A physician who claims a home office deduction through the MPC must have a designated workspace used exclusively for work — not a kitchen table. The auditor may ask about the proportion of the home used for the office, whether it is a separate room, and how many days per week work is conducted there.

CME and travel: Professional development and travel expenses are subject to scrutiny where the amounts are high or where the travel was to a desirable location. The auditor will look for conference registration receipts, professional purpose documentation, and evidence that the CME was required for or connected to the physician's practice.

The Proposed Adjustments

After the initial document review, the auditor typically issues a Proposed Adjustments letter — identifying the items they intend to reassess and requesting a response. This is the critical point of the process. The physician's CPA should review every proposed adjustment and respond in writing, with supporting documentation and legal argument where applicable.

Many proposed adjustments — particularly those involving shareholder loan timing errors, vehicle use percentages, and home office calculations — are negotiable. The auditor's first proposal is not always the final position. A well-prepared, documented response by the CPA can result in a significantly reduced reassessment.

What a Well-Prepared MPC Looks Like to an Auditor

An MPC that has maintained a contemporaneous vehicle log, declared salary and dividends through proper payroll and dividend resolutions, maintained a zero or promptly repaid shareholder loan balance, and reconciled OHIP payments to corporate revenue on an annual basis presents an auditor with very little to adjust.

The audit ends quickly. The adjustments, if any, are minor. The cost to the physician is primarily CPA time for responding to the audit — not the tax reassessment itself.

When to Speak With a CPA

Immediately upon receiving the audit notification. The CPA should review the corporate records before responding to the auditor, assess the documentation position, and manage all communication with the CRA. An auditor who receives early, professional, cooperative responses is typically more efficient and less expansive in scope than one who faces delays and incomplete documentation.

Rotaru CPA manages CRA audits of professional corporations and coordinates the response strategy. Book a consultation if you have received an audit notification.