In the Proposing Release, we stated that non-substantive materials that are not part of the workpapers, such as administrative records, and other documents that do not contain relevant financial data or the auditor's conclusions, opinions or analyses would not meet the second of the criteria in rule 2-06(a) and would not have to be retained. We specifically asked if such a test should be documentation of "significant differences in professional judgment" or "differences of opinion on issues that are material to the issuer's financial statements or to the auditor's final conclusions regarding any audit or review." In the proposing release, we estimated that adoption of the rule would not result in any significant increase in costs for accounting firms or issuers because the rule would not require the creation of records, would not significantly increase procedures related to the review of documents, and minimal, if any, work would be associated with the retention of these records. "34 The proposed rule, therefore, recognizes that the Oversight Board, subject to Commission oversight, has the ability to review and change the nature and scope of the required documentation of procedures, evidence, and conclusions related to audits and reviews of financial statements.35, As noted by several commenters, there may be significant overlap of the documents falling within the definition of "workpapers" and the documents that would be retained pursuant to the description in paragraph (a) of the rule of "other documents that form the basis of the audit or review, and memoranda, correspondence, communications, other documents, and records (including electronic records), which (1) are created, sent or received in connection with the audit or review, and (2) contain conclusions, opinions, analyses, or financial data related to the audit or review."36. PDF 9100 Auditor Guidance Material Due to revisions made to the rule the cost estimates provided by the commenters, however, may no longer be accurate. 61 Letter from Sullivan & Cromwell dated December 26, 2002. This commenter estimated that, depending on the information systems and staff currently in place, to maintain electronic records "an investment of $100,000 to $250,000 for each $5 million in net fees is likely with ongoing annual expenses of $50,000 to $100,000. References to the accountant include any accounting firm with which the certified public or public accountant is affiliated." 19 Senator Leahy stated on the Senate floor, "Non-substantive materials, however, which are not relevant to the conclusions or opinions expressed (or not expressed), need not be included in such retention regulations." Paragraph (c) also states that the documents and records to be retained include, but are not limited to, those documenting consultations on or resolutions of differences in professional judgment. In a companion release, the Commission proposed to amend this definition to include the term "registered public accounting firm." Congress intended that accounting firms retain substantive materials that are relevant to the review or audit of financial statements filed with the Commission and enumerated the records described in the rule as being relevant to audits and reviews. "Circumstances that cause significant difficulty in applying auditing procedures that the auditor considered necessary. Section 10A(a) of the Securities Exchange Act of 1934 ("Exchange Act") states, "Each audit required pursuant to this title of the financial statements of an issuer by an independent public accountant shall include" designated procedures. 92 Letter from Lynette Downing, HLB Tautges Redpath, Ltd., dated December 27, 2002. Section 802 is intended to require the retention of more than what traditionally has been thought of as auditor's "workpapers. 32 American Institute of Certified Public Accountants ("AICPA"), Statement on Auditing Standards No. We will apply the definition in rule 2-01(f)(1), as amended, to rule 2-06. 42 SAS 96, 9; AU 339.09, which states: In addition, the auditor should document findings or issues that in his or her judgment are significant, actions taken to address them (including any additional evidence obtained), and the basis for the final conclusions reached. The reference in paragraph (c) to "significant" matters is intended to refer to the documentation of substantive matters that are important to the audit or review process or to the financial statements of the issuer or registered investment company.54 Rule 2-06(c) requires that the documentation of such matters, once prepared, must be retained even if it does not "support" the auditor's final conclusions, because it may be relevant to an investigation.55 Similarly, the retention of records regarding a consultation about, and resolution of, differences in professional judgment would be relevant to such an investigation and must be retained. Moreover, we do not intend for the auditor's subjective judgment of whether a matter is significant to be determinative. The title for the collection of information is "Regulation S-X-Record Retention." 54 SAS 96 requires the auditor to document findings or issues that in his or her judgment are significant. The following chart includes federal requirements for record-keeping and retention of employee files and other employment-related records. 148 Cong. In addition to providing materials for investigations, the availability of the documents subject to rule 2-06 might facilitate greater oversight of audits and improved audit quality, which, in turn, ultimately could increase investor confidence in the reliability of reported financial information. Interim testing will help the internal auditor review performance and assess gaps. This interpretation states: Accordingly, each assistant has a professional responsibility to bring to the attention of appropriate individuals in the firm, disagreements or concerns the assistant might have with respect to accounting and auditing issues that he believes are of significance to the financial statements or auditor's report, however those disagreements or concerns may have arisen. How long should I keep records? We considered not applying the proposals to small accounting firms. dated November 26, 2002. Summary: We are adopting rules requiring accounting firms to retain for seven years certain records relevant to their audits and reviews of issuers' financial statements. Chesterfield County, Virginia Internal Audit Records Retention Schedules: State Board of Accounts Audit Requirements S7419 (July 26, 2002). 18 Letter from Sullivan & Cromwell dated December 26, 2002. Finally, we recognize that audits and reviews of financial statements are interactive processes and views within an accounting firm on accounting, auditing or disclosure issues may evolve as new information or data comes to light during the audit or review. The rule does not include this sentence, but instead notes that the Commission or the Oversight Board may reexamine these requirements in the auditing standards. One commenter suggested that investment advisers and broker-dealers be included within the scope of the rule. The standard as amended will be effective for audits of financial statements for fiscal years ending on or after December 15, 2024. 47 See, e.g., letter from BDO Seidman, LLP, dated December 27, 2002; letter from Grant Thornton LLP dated December 27, 2002; letter from KPMG LLP dated December 27, 2002; letter from Deloitte & Touche LLP dated December 27, 2002. Keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction. Regarding the commenter's cost estimates related to potential litigation, we recognize that one purpose of section 802 is to facilitate investigations of potential violations of securities laws and criminal laws,79 which could impact a firm's litigation costs. Rec. "4 We are directed under that section to promulgate rules related to the retention of records relevant to the audits and reviews of financial statements that issuers file with the Commission. Workpaper Retention Presents Internal Audit With Its Own Compliance The records to be retained would include those relevant to the audit or review, including workpapers and other documents that form the basis of the audit or review and memoranda, correspondence, communications, other documents, and records (including electronic records), which are created, sent or received in connection with the audit or review, and contain conclusions, opinions, analyses, or financial data related to the audit or review. Rec. Performance Standards describe the nature of internal audit activities and provide criteria against which the performance of these services can be evaluated. In other words, only the audits of the financial statements of investment advisers and broker-dealers meeting the definition of "issuer" in section 10A(f) are subject to the retention requirements in rule 2-06. 96, "Audit Documentation," states, in part: The auditor should prepare and maintain audit documentation, the content of which should be designed to meet the circumstances of the particular audit engagement. Quality Record Retention (Internal Audits, CA's) - The Elsmar Cove Chart 2: RM-3 Form Process OBJECTIVES Objectives of the audit were to: Evaluate CCPS compliance with LVA record retention requirements. We further estimated that, assuming an accounting firm's average cost of in-house staff is $110 per hour,97 the total cost would be $1,650,000. 36 See, e.g., letter from PricewaterhouseCoopers dated December 27, 2002. 59 Letter from Mr. Donald G. DeBuck, Computer Sciences Corporation, dated December 26, 2002. ISO have a problem with that? As a result of these revisions and clarifications, we believe that implementation of the revised rule should be less costly for accounting firms than anticipated by the commenters. GAAS, however, currently does not require explicitly that auditors retain documents that do not support their opinions and GAAS does not set definite retention periods. 78j-1(a)) applies, or of the financial statements of any investment company registered under section 8 of the Investment Company Act of 1940 (15 U.S.C. By adding 210.2-06 to read as follows: 210.2-06 Retention of audit and review records. Agency: Securities and Exchange Commission. An interpretation of this section issued by the AICPA's Auditing Standards Board emphasizes the professional obligation on each person involved in an audit engagement to bring his or her concerns to the attention of others in the firm and, as appropriate, to document those concerns. Such documents and records include, but are not limited to, those documenting a consultation on or resolution of differences in professional judgment. 43 Such a memorandum might be prepared in connection with the consultation process that is part of an accounting firm's Internal audit should swiftly surface any discrepancies between enterprise retention policies and those requirements mandated by laws and regulations, for such discrepancies could expose the enterprise to potential legal and regulatory infractions beyond internal audit. 89 See section 802 of the Sarbanes-Oxley Act. In the Initial Regulatory Flexibility Analysis we requested comment on the number of firms with less than $6 million in revenue in order to determine the number of small firms potentially affected by the rule, but we received no response. Any issues identified during audits are to be documented against 9100:2009 requirements. S7419 (July 26, 2002). To coordinate with forthcoming auditing standards concerning the retention of audit documentation, the rule requires that these records be retained for seven years after the auditor concludes the audit or review of the financial statements, rather than the proposed period of five years from the end of the fiscal period in which an audit or review was concluded. The number of public companies includes those filing annual reports and those filing to conduct an initial public offering. Commenters also questioned whether all of the issuer's financial information, records, databases, and reports that the auditor examines on the issuer's premises, but are not made part of the auditor's workpapers or otherwise currently retained by the auditor, would be deemed to be "received" by the auditor under rule 2-06(a)(1) and have to be retained by the auditor.20 We do not believe that Congress intended for accounting firms to duplicate and retain all of the issuer's financial information, records, databases, and reports that might be read, examined, or reviewed by the auditor. PDF Internal Audit Records Management

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