Practitioners often find themselves confronted with years or even decades of files and wonder, “Do I really need all of this?” If your archive is ready for a late spring cleanup, consider the role of keeping records before deleting them. Use the following information to guide your document retention policy: Whether a record is paper or electronic, the company`s retention policy must be applied consistently. Electronic documents proving the work performed must be stored in customer and order files and not as attachments to emails. All relevant customer service information must be kept in the order`s working documents and other official company files or storage media. Under this Directive, companies should take into account limitation periods, disclosure rules, contractual requirements, registration and filing requirements, government accounting rules and other applicable rules and regulations. Once the company has established a record retention policy, all members of the firm must include it in letters of commitment and in communications with clients related to the specific services provided. Several large companies have published brochures outlining their records retention policies, defining the retention period for each type of record, and including the brochure with its letters of commitment and other correspondence sent to customers. Once you know what types of documents you have, it`s time to figure out how long you need to keep tax returns, bank statements, and other documents. Below, we`ll discuss legal retention requirements and best practices for records that are not covered by federal or state laws. Many professional liability defenses were thwarted by an email in which the tone was taken out of context.
As a result, companies can exercise additional judgment by applying a separate retention period for emails to protect themselves from this risk. Read the article “Spotlight on Professional Liability: How Social and Digital Media Can Be a #majorrisk,” JofA, March 2016, which discusses the risks CPAs may face in electronic communications and how their appropriate use can help avoid potential liability risk. The contracts concluded by the ACP may define the period for which the data must be stored and retained on behalf of the customer. In some cases, a government entity or agency actually determines the period during which the CPA must maintain records and working documents. Securities and Exchange Commission rules require a CPA to keep working papers and other relevant documents for seven years. Practitioners who perform this type of work should ensure that these requirements are mentioned in the company`s retention policy. As a business owner, you probably have various documents stored such as tax returns, personal records, and bank statements. Unfortunately, there are no unshakable retention rules that apply to all types of records, which means you need to categorize your files and create a document retention policy (DRP).
CPAs, who are generally known to be risk-averse, may not want to get rid of their records. But at what point does the keeping of records to err on the side of caution turn into hoarding records? When determining which records should be retained or deleted, you should consider retaining items that document or support the following: It is understandable that a CPA may collect client information in the course of providing services. While practitioners are and should be required to retain copies of this information for their own purposes and requirements, clients have the primary responsibility for maintaining their own records. To avoid becoming your client`s filing cabinet, remind clients of their obligation to keep their own records and let them know that the company`s working documents do not replace the client`s records. Given the factors described above, a CPA company may set different retention periods for different clients and/or services. In practice, it is recommended that CPA firms choose the longest retention period and apply it consistently to all records to reduce the administrative complexity associated with record keeping. One of the factors to consider in determining how long records are retained is the limitation period, which governs how long an applicant can sue a CPA. This period is subject to state law and may, depending on the nature of the measure, such as: Abuse or breach of contract, vary. Normally, the limitation period begins on the day the customer first became aware or should have known of the act, error or omission that led to the action.
It is important to note that this is often not the date on which the CPA provided the service. The Internal Revenue Service has established some basic record-keeping rules for tax documents. Outside of the tax arena, there is remarkably little advice on how long you should keep company records. Most lawyers, accountants and accounting departments recommend keeping original documents for at least seven years. As a rule, seven years are enough to defend tax audits, lawsuits and possible claims. After reviewing your state`s federal rules and document retention schedules, you may still have records that you`re not sure about. In this case, the Uniform Preservation of Private Business Records Act (UPPBRA) is a good guideline. Deleting records is not as simple as separating recyclables from other types of waste.
Just because the retention period has expired does not mean that the practitioner`s duty to protect the privacy of customer data has also expired. It is essential to have the files well disposed of. However, the use of such a paperless system makes it all the more important to have a record retention policy. The following suggestions relate to the processing of certain types of electronic documents. Your state and local government may have stricter guidelines. Some external bodies, such as the Payment Card Industry Security Standards Council (PCI SSC), require companies to keep records for PCI compliance. In general, the following laws, statutes and agencies require records to be retained: Records retention policies generally require companies to retain records for one, three, or seven years. In some cases, you need to keep the records forever. If you don`t know what to keep and what to shred, your accountant, lawyer, and state records agency can guide you. My company recently learned a painful lesson about the value of record keeping. We suffered a major data loss in September 2008 when Hurricane Gustav sent a power surge into the office while our system was backed up.
Not only have we lost our hard drive; We also lost the backup tape. The previous backup tape was 30 days old, so we lost 30 days of work and data storage.