Overview

The Sarbanes-Oxley Act of 2002, also called SOX and known as the Public Company Accounting Reform and Investor Protection Act of 2002 was signed into law on July 30, 2002 by President George W. Bush. It was in-acted as response to a number of accounting mis handling by few major corporations such as Enron and Worldcom that degrade the public trust in publicly trading companies.

How SOX relate to Email Archiving?

http://www.law.com/jsp/article.jsp?id=1039054510969

Email is the core communication medium in the majority of businesses and it is a legal document that must be preserved in order to comply with the law as defined in Sarbanes-Oxley Act. Corporation exchange documents, ideas, agreements and critical information via email internally and with customers, accounting and audit firms. All email records must be retained as defined SOX and SEC ruling for public companies.

SOX was in-acted to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws and for other purposes.

Section 802 of the act amends whoever knowingly alters, destroys, mutilates, conceal, covers up or falsify, or makes a false entry in any record, document or tangible object with the intent to impede, obstruct or influence the investigation of proceedings involving federal agencies or bankruptcy proceedings may be fined, imprisoned up to 20 years or both.

Furthermore, Section 802, any accountant who conducts an audit of an issuer of securities shall maintain all audit records and review paper for a period of five years.

The SEC Adopted these retention rules on January 22, 2003. 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.