Why is it important to maintain a file of both paper and electronic financial records?

• A. Because electronic records are always more secure than paper records.
• B. Because financial regulations require only paper records to be kept.
• C. To ensure records are accessible in case one format is lost or becomes inaccessible.
• D. To reduce the need for regular backups of financial data.

Answer: (C)

Verified step by step guidance

1. Understand the importance of maintaining financial records: Financial records are essential for tracking transactions, ensuring compliance with regulations, and making informed business decisions.
2. Recognize the limitations of each format: Paper records can be lost due to physical damage (e.g., fire, water) or misplacement, while electronic records can become inaccessible due to technical issues (e.g., system crashes, cyberattacks).
3. Learn the benefits of redundancy: Keeping both paper and electronic records ensures that if one format becomes inaccessible, the other can serve as a backup, providing continuity and security.
4. Consider accessibility: Maintaining records in multiple formats ensures that they are accessible to different stakeholders, such as auditors or regulatory bodies, who may prefer one format over the other.
5. Understand compliance and best practices: While financial regulations may not mandate both formats, maintaining dual records is a proactive approach to safeguarding financial data and ensuring long-term accessibility.