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The Destruction of Corporate Audit Records

Businesses are required by law to follow strict procedures when it comes to record keeping. Failing to comply with these rules can have serious consequences, leading to charges of fraud, so if you are being investigated for fraudulent activity in relation to your business, you should speak with a white collar crime attorney who is well-versed in both state and federal law and can ensure that your interests are defended.

Federal Law

Under federal law, any accountant who conducts an audit for a business that issues securities or is a registered investment company must maintain all audit records for at least seven years from the end of the fiscal year when the review was concluded. This includes any records that were created, sent, or received in connection with an audit and which contain conclusions, opinions, analyses, or financial data related to the review.

Types of Records

Aside from documents that form the basis of a review or an audit, businesses are also required to retain the following types of records:

  • Work papers, which are documents that make up the principal record of the auditing procedures applied, the evidence that was obtained, and the conclusions reached by the auditor;
  • Memoranda;
  • Business correspondence;
  • Communications; and
  • Electronic records.

However, certain documents are not considered substantive and do not have to be retained, including:

  • Superseded memoranda drafts, financial statements, or regulatory filings;
  • Notes on outdated memoranda drafts, financial statements, or other filings that only reflect preliminary or incomplete thinking;
  • Copies of old work papers that were corrected for typographical errors or errors made by employees in training;
  • Duplicates; and
  • Voicemail messages.

As long as these records do not contain information that is inconsistent with the auditor’s final conclusions, they will not need to be retained. These rules apply equally to foreign and domestic accounting firms.

Auditors, accountants, and business owners that are convicted of violating these rules face severe consequences, including fines and imprisonment for up to ten years. Having an official company policy that clearly outlines which types of documents must be retained and for how long can go a long way towards helping employees avoid making mistakes. The law does not require a company to have intentionally destroyed the documents in order to be convicted, making it doubly important for accountants and business managers to be familiar with the law.

Contact an Experienced White Collar Crime Attorney Today

Besides causing the accused a significant amount of stress, being convicted of a white collar crime will result in the creation of a permanent criminal record, which can make it difficult to secure employment or find housing. At Jeffrey S. Weiner, P.A. Criminal Defense Attorneys, we understand the physical, emotional, and financial toll that these types of charges can take and so dedicate ourselves to aggressively representing our clients’ interests, whether in the courtroom or negotiations. To speak with an experienced attorney, please call (305) 670-9919 to schedule a case review. A member of our legal team can also be reached via live chat.

Resources:

law.cornell.edu/uscode/text/18/1520

sec.gov/rules/final/33-8180.htm

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