Many accountancy firms are contemplating changing theirworking systems to move to a ‘paperless’ office. This involves storingdocuments electronically and thereafter destroying the originals of thosedocuments. In an increasingly ‘paperless’ world this is becoming second nature;however the impact of such actions may not always be fully explored.
Amongst the issues to be considered are:
•Ownership of documents
•Protection of a client’s confidentiality
•The evidential value of electronic copies and
•The security of holding only electronic copies.
Here we consider briefly some of the relevant issues.
Ownership of Documents
One of the first things to consider is who owns eachspecific document: is it the accountant, the client or a third party? Anaccountant does not want to be destroying documents that he does not ownwithout the owner’s consent.
Ownership of documents can be a thorny issue which is veryfact dependant. When considering issues of ownership, legal advice shouldusually be sought. By way of very general comment, if an accountant acts as aprincipal when creating a document the document may well be owned by theaccountant. If an accountant acts as an agent for his client, the documentcreated will probably be owned by the client. As for correspondence theaccountant receives from third parties, ownership can depend on therelationship between the accountant and the client. As for correspondencepassing between the accountant and his client, letters sent will usually be therecipient’s documents, whilst copy letters retained by the author should be theauthor’s documents. It is prudent for an accountant’s letter of engagement toset out who owns what categories of documents as that can be determinative ofownership issues. It is also very good practice for the letter of engagement toexplain the accountant’s document retention policy. If the accountant’s clienthas agreed to a document retention policy then action taken in accordance withit (such as destruction of certain documents) should create few problems (byway of complaints or claims) for the accountant.
Protection of Client Confidentiality
Not only do accountants have to be very careful not todestroy a client’s documents or a third party’s documents without permission,accountants must be careful (where they have such permission) to destroydocuments correctly. For instance, failure by an accountant to destroy aclient’s documents properly could expose the accountant to claims for breach ofconfidentiality.
Evidential Value of Electronic Copies
Consideration might also be given to the evidential value ofelectronic copies over the evidential value of original paper documents. ICAEWcomment that original documentation is the best evidence but copies in whateverformat (microfiche, scanned etc) are accepted and recognised as evidence. It isuseful to note, albeit directed at solicitors, that the Law Society recognisesthere is a dearth of judicial authority on this topic and until the law isclarified it only gives general guidelines to solicitors.
It refers to having received advice
1.that a microfilm of any document in a solicitor’s filewill be admissible evidence to the same extent as the original documentprovided that there is admissible evidence of the destruction of the documentand identification of the copy and
2.that written evidence of both the destruction of theoriginal and identification of the copy will enable the microfilm to be adducedin subsequent civil and criminal proceedings.
The British Standards Institution Code of Practice on LegalAdmissibility and Evidential Weight of Information Stored Electronically (BSIBIP 0008) sets out guidelines which, if adhered to, should give increasedconfidence in electronic documents and their admissibility in Court and beforeother statutory bodies. In particular, it sets out key principles which willensure that information is managed and stored according to best practice. Thosekey principles include: guidance on the appropriate processes to follow toensure documents can be authenticated; best practice in relation to proceduresfor storing and accessing documents (including scanning, indexing, retrieving,archiving, off-site storing and training); and the methods by whichorganisations can demonstrate their adherence to BIP 0008. If a firm isintending to go paperless then, in case electronically stored information maybe needed as evidence in a court of law, compliance with BIP 0008 is recommended.
Additional useful guidance for accountancy firms thinking ofgoing paperless can be found in the ICAEW Document Retention Help Sheet 20.
Whilst in our experience it would be unusual for insurers torequire insured accountants to maintain records in a particular form,accountants should have careful regard to any questions in proposal forms as todocument retention policies and also to provisions, if any, in insurancepolicies relating to document retention.
Should any claims be made against accountants who have gonepaperless it is important that they have done everything reasonably possible toensure that the relevant documents have been retained securely and are capableof being admissible evidence.
This article was written by Fishburns LLP and has beenreproduced with their permission (professional advice should always be soughtwhere assistance is required in specific areas of law; Fishburns LLP do notaccept responsibility for any action based on this article). Fishburns LLP offerdispute resolution and claims management services for the insurance sector. Formore information please visit www.fishburnslaw.com.