I know Sharepoint tracks modifications to files but does it track if a specific user opened a file for viewing?
Yes, check out Item level Auditing and Audit log reports: http://msdn.microsoft.com/en-us/library/bb397403(v=office.12).aspx#MOSS2007ItemLevelAudit_AuditingwithSharePointServer2007
http://office.microsoft.com/en-us/sharepoint-server-help/view-audit-log-reports-HA010100005.aspx
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