SEC Adopts Rules on Retention of Records Relevant to Audits and
Reviews
FOR IMMEDIATE RELEASE
2003-11
Washington, D.C., January 22, 2003 — The Securities and
Exchange Commission today approved the adoption of Rule 2-06 of Regulation
S-X to implement Section 802 of the Sarbanes-Oxley Act of 2002.
Documents to be retained — Rule 2-06(a) will require that
accounting firms retain records relevant to the audits or reviews of
issuers' and registered investment companies' financial statements,
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.
Time of retention — Rule 2-06(a) also will require that records
be retained for seven years after the auditor concludes the audit or
review of the financial statements, instead of the proposed period of five
years from the end of the fiscal period in which an audit or review was
concluded. This change will coordinate the Commission's rule with the
forthcoming auditing standards from the Public Company Accounting
Oversight Board (PCAOB), which will require the retention of audit
documentation for seven years.
Workpapers — Rule 2-06(b) will define the term "workpapers" to
be those documents that record the audit or review procedures performed,
the evidence obtained, and the conclusions reached by the auditor. The
definition will recognize that the PCAOB may establish auditing standards
further defining the term.
Differences of Opinion — Because the auditing literature
requires that records be retained only if they "support" the auditor's
report, proposed Rule 2-06(c) stated that records should be retained if
they support or "cast doubt" on the final conclusions reached by the
auditor. The proposed rule also stated that an example of records that
"cast doubt" on an auditor's conclusions would be "documentation of
differences of opinion concerning accounting and auditing issues."
Several commenters stated that the proposed "cast doubt" language was
unworkable and would lead accounting firms to retain documents related to
virtually every exchange of ideas on any topic. In consideration of the
comments received, the "cast doubt" language will be replaced with a
requirement to keep records that either support the auditor's final
conclusions or contain information or data, relating to a significant
matter, that is inconsistent with the final conclusions of the auditor on
that matter or on the audit or review. Rule 2-06(c) also will state 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.
The compliance date for these rules is October 31, 2003.
* * *
The full text of detailed releases concerning each of these items will
be posted to the SEC Web site as soon as possible.
http://www.sec.gov/news/press/2003-11.htm
