A:

According to Sarbanes Oxley Act (SOX), companies are required to keep all documents that contain information about a company's policy or performance. Any document relevant to the auditing process that contains information about a company that can be represented with words or numbers is considered a document that must be retained for auditing purposes. To emphasize this point, section 802 of the act stresses that document retention rules applies to all of a company's e-mail, e-mail attachments, and documents retained on computers, servers, auxiliary drives, e-data, web-sites, as well as hard copies of all company records. Generally accepted accounting principles (GAAP) also require that companies retain business records.

Under SOX,
there are four key components that must be met to ensure that digitally stored documents meet document retention policies. Those components are:

  • The documents, including emails must be 'tamper proof'
  • Digitally stored documents must be password protected, read-only and cannot be deleted
  • The digital documents that are stored must be encrypted and digitally signed
  • The digitally stored documents must have the ability to be audited by a third party, and have search capability.

The American Institute of Certified Public Accountants, an organization that is integral to setting the GAAP, also has certain suggestions regarding appropriate controls for digitally stored documents. Copies of emails and other digital copies used during the course of business should be retained both digitally and in hard copy. When documents are stored digitally, it is required that proper internal controls be exercised. Some required internal controls are that the IT personnel responsible for storing digital documents must be independent, and hard copy of security logs must be stored.

For more on SOX and auditors, see An Inside Look At Internal Auditors.

This question was answered by Chizoba Morah.

RELATED FAQS
  1. How can I change my name on my Social Security card?

    Learn what documents are needed to change your name on your Social Security card whether you are a natural-born or foreign ... Read Answer >>
  2. Is a private company required to disclose financial information to the public?

    Understand whether a private company is required to disclose financial information to the public. Learn what is required ... Read Answer >>
  3. What should I do to prepare for an IRS audit?

    Find out how to prepare for an IRS audit, what kinds of audits you might face and what kinds of habits you should develop ... Read Answer >>
  4. What documents I need to transfer an IRA/SEP/SIMPLE to a Traditional IRA?

    Most firms require that you complete their account transfer request form, which they use to request the transfer of assets ... Read Answer >>
  5. What documents should I have ready in case my partner or I should die?

    Estate planning is one of those topics that most people avoid dealing with until they're forced to. Because of this, many ... Read Answer >>
  6. Who enforces GAAP?

    Take a deeper look at the private enforcement mechanisms behind the generally accepted accounting principles for American ... Read Answer >>
Related Articles
  1. Managing Wealth

    Pros/Cons of Storing Estate-Planning Papers Online

    Digital storage takes the hassle out of keeping track of estate-planning paperwork, but there are a few significant drawbacks.
  2. Retirement

    Estate Planning Goes Digital: How to Get Started

    Digital estate planning is an important part of the estate planning process given today's tech-centric world. Here's how to create this type of plan.
  3. Financial Advisor

    SEC Audit? How Financial Advisors Can Be Ready

    Your firm may never be audited by the SEC, but you need to be prepared nonetheless. Follow these tips to make sure you're in compliance and organized.
  4. Managing Wealth

    Protecting Your Financial Documents From Disaster

    Organizing and updating your records regularly can save you a lot of grief in a time of crisis.
  5. Small Business

    Employer? Steps To Fill Out Immigration's I-9 Form

    Step-by-step, here's how you and the employee you've hired fill out this required form from the U.S. Citizenship and Immigration Services.
  6. Small Business

    Do's & Don'ts Of Digital Marketing

    Digital marketing is not as scary or as complex as it is often made out to be, but there are certain best practices that you should follow to make it work.
  7. Financial Advisor

    Examining A Career As An Auditor

    Stricter government regulations have put auditing professionals in demand.
  8. Taxes

    What's an Audit?

    An audit is an objective examination of accounting records that makes sure the records are a fair and accurate representation of the transactions they claim to represent.
  9. Retirement

    How to Manage Money for Someone with Alzheimer's

    Alzheimer’s disease affects more than 5 million Americans, and approximately one in three seniors will die with dementia. Proactive planning is essential.
RELATED TERMS
  1. Alternative Documentation

    A documentation process designed to expedite loan approval where ...
  2. Internal Audit

    The examination, monitoring and analysis of activities related ...
  3. Closing Statement

    A document commonly used in real estate transactions, detailing ...
  4. Low / No Documentation Loan

    A category of loans which generally fall into the Alt-A sector ...
  5. LLC Operating Agreement

    An LLC Operating Agreement is a document that customizes the ...
  6. Hospital Visitation Authorization

    A document that indicates who is allowed to visit a patient in ...
Hot Definitions
  1. Sharpe Ratio

    The Sharpe Ratio is a measure for calculating risk-adjusted return, and this ratio has become the industry standard for such ...
  2. Death Taxes

    Taxes imposed by the federal and/or state government on someone's estate upon their death. These taxes are levied on the ...
  3. Retained Earnings

    Retained earnings is the percentage of net earnings not paid out as dividends, but retained by the company to be reinvested ...
  4. Demand Elasticity

    In economics, the demand elasticity refers to how sensitive the demand for a good is to changes in other economic variables. ...
  5. Dark Pool

    A dark pool is a private financial forum or exchange for trading securities.
  6. Quadruple Witching

    The expiration date of various stock index futures, stock index options, stock options and single stock futures. All stock ...
Trading Center