Question

A Question from - BSBFIM501 Manage budgets and financial plans

Financial records must meet a number of management requirements for both sole traders and companies. Explain the financial record keeping and audit requirements for the retention of financial records. Your response should be approximately 100-150 words.

Answer 1

Bookkeeping—financial record keeping—is the cornerstone of a healthy business. Accurate records ensure you can make intelligent decisions, stay on the right side of the IRS, and demonstrate the value of your business should you decide to sell it. Join accounting professors Jim and Kay Stice for this overview of financial record keeping. Learn how to create forecasts and a quantitative business plan, capture rudimentary business data such as sales and expenses, understand income tax reporting, and prepare detailed reports to help you attract financing from banks and other investors. This is an introductory course—no prior accounting knowledge is required. After taking it, you should understand the basics of this critical business function.

Under the new rule, accountants who audit or review an issuer's or registered investment company's financial statements must retain certain records for a period of seven years from conclusion of the audit or review. The records to be retained include records relevant to the audit or review, such as 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. Records described in the rule would be retained whether the conclusions, opinions, analyses, or financial data in the records support the final conclusions reached by the auditor, or contain information or data, relating to a significant matter, that is inconsistent with the final conclusions of the auditor on that matter or the audit or review. The required retention of audit and review records should discourage the destruction, and assist in the availability, of records that may be relevant to investigations conducted under the securities laws.