On 1/27/06, Bil Kellermann <[log in to unmask]> wrote:

> Lets take the US Supreme court decision in the Arthur Anderson case.  Anderson had a policy that audit working papers were to be destroyed once the audit report was finalized.

 Andersen's Policy (Practice Administration: Client Engagement
Information -- Organization, Retention and Destruction, Statement No. 760)
dated Feb 2000 clearly states that

4.4.1 When working papers are no longer needed to support or defend
our work, they should be destroyed. As a general rule, all working
papers should be retained for six years and then destroyed. This
period is predicated upon legal statutes of limitations in the United
States.

the problem for Andersen is that they did not consistently apply the
retention period to the working papers. The policy varied from
location to location, but at a minimum they were to be retained for 6
years,  depending upon various statutes of limitations. IIRC they
tended to retain the working papers well beyond the stated retention
period. The message sent out from the Chicago AA attorney to the field
offices was that they were to make sure they were in compliance with
the retention policy.

the same policy in an earlier section did state that

3.5.3
Information having relevance to our opinion or findings should be part
of the central client engagement files. Drafts and preliminary
versions of memos and reports, superseded workpapers, backup
diskettes, and other types of information not in the central client
engagement files should be destroyed when they are no longer useful to
the
engagement and no later than when the engagement is completed. Draft
versions of documents should be discarded or deleted at the time the
final document is completed. Individuals who create these drafts are
responsible for destroying them. Exceptions to this may exist in
situations where the pre-final versions are the working papers (the
source documents for supporting our work) in which case they should be
retained.

This section clearly states that drafts and preliminary versions
should be destroyed or deleted at the time the final is completed and
it is up to the individuals who created the drafts to destroy them.
But the section also states that source documents that support their
work "should be retained."

> The working papers are records up until that time.  Once the report was finalized, the report became the record and the papers could be destroyed pursuant to the records retention and destruction policy in place.

The working papers and the final report are two different types of
records. The working papers are  the detailed information used to
develop the report. The report is nothing more than a summary of what
is contained within the working papers.. The working papers do not
stop being records once the final report is issued. For example if a
client challenges the findings in an audit report the auditor would
refer to the working papers to find the detailed information that
supports the finding.


> If reasonable, appropriate and specific notice was made to preserve the working papers, they retain their attribute as records.  If they need not be retained, but are, it becomes the proverbial "number of angels dancing on a pinhead" whether they are records, but they are certainly documents in possession, custody or control.

I agree that the working papers are documents, but in the end they are
records. Their status did not change when the final report was issued.


 >Ultimately, Anderson was exonerated, too late.

Andersen was not exonerated. Their conviction was overturned because
the Supreme Court found that "(T)he jury instructions failed to convey
properly the elements of a "corrup[t] persuas[ion]" conviction under
§1512(b). " and the "...case was remanded for further proceedings
consistent with this opinion."

http://www.supremecourtus.gov/opinions/04pdf/04-368.pdf


--
Peter Kurilecz CRM CA
Richmond, Va

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