Can a small Ontario corporation avoid having a formal audit every year?

Yes. The Ontario Business Corporations Act allows non-distributing corporations (private companies that have not offered shares to the public) to dispense with an audit if all of the shareholders entitled to vote consent to this in writing each year. This is called a waiver of the audit requirement, and it is separate from the annual meeting resolution.

If shareholders waive the audit, the corporation is not required to have its financial statements audited by a licensed public accountant. However, the corporation still needs to prepare financial statements, and those statements must be placed before the shareholders at the annual meeting (or in the written resolution equivalent).

Many small business owners use a review engagement or compilation by their accountant rather than a full audit, which is less expensive while still providing some level of professional involvement. The right level of financial reporting depends on factors such as whether you have outside investors, lenders requiring audited statements, or plans to sell the business. Getting advice from both a corporate lawyer and your accountant ensures you choose the appropriate level without creating compliance gaps.