Introduction
An audit notice can feel like a storm warning—but with preparation, it becomes a manageable process. The key: align your narrative, evidence, cost schedule, and responses in advance. This post is your audit survival guide.
Why Audits Happen: Triggers & Red Flags
- Sudden jump in claimed hours or amounts
- Weak or vague narrative
- High ratio of R&D hours vs total engineering
- Overuse of subcontractors without experiment linkage
- Thin or retroactive documentation
What CRA Reviews in Depth
- Narrative consistency & logic
- Time logs / labour allocation
- Materials, overhead, subcontractor costs
- Experiment records / test logs / failure paths
- Contemporaneous evidence
- Interviews or site visits
Pre-Audit Readiness Checklist
During the Audit: Best Practices
- Respond clearly, concisely, and on schedule
- Always tie claims back to experiments / logs
- When in doubt, acknowledge weakness but contextualize
- Don’t volunteer extra materials unnecessarily
- Keep a log of each CRA request and your response
Handling Adjustments
- Ask CRA to explain rationale for disallowance
- Propose a recalibrated claim portion if full disallowance seems likely
- Provide supplemental evidence or clarification
- If result is unsatisfactory, consider formal objection / appeal
Real Case Examples (Anonymized)
- A software firm reclaimed ~300 hours by producing parameter sweep logs after initial pushback
- A hardware startup defended its CapEx by demonstrating precise usage logs
- A biotech firm improved future audit outcomes by internal mid-project reviews
Post-Audit: Strengthening Next Year
- Draft narratives during project (not at year end)
- Use version control, lab notebooks, test logs from Day 1
- Run internal mini audits mid-cycle
- Continually refine your audit scorecard and checklist
How GovMoney Can Help
We provide Audit Readiness & Defense: mock audit simulation, gap analysis, response coaching, appeal assistance, and strengthening your team’s audit posture.
