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Retention period is the length of time a document should be archived for future reference. It varies between industries and jurisdictions, with examples including personal income records for three years and client files for six to seven years. The Sarbanes-Oxley Act established a seven-year retention period for audit-related documents. The purpose is to ensure documents can be referenced for tax, judicial, or general reasons. Constitutional documents have an indefinite retention period.
The retention period of a document is the length of time the document should be archived after it is no longer used because it may need to be referenced in the future. Retention period is a term most often associated with accounting and tax records, although attorneys are also generally required to keep client files for a period of time after the end of representation. Perhaps the most notable example of a statutory retention period is in the Sarbanes-Oxley Act, which is anti-fraud legislation enacted in the United States in 2002, requiring audit records to be retained for seven years. The required retention periods vary not only from sector to sector, but also vary between jurisdictions.
The reasons for a particular retention period depend on the rules of the specific industry, but are generally geared towards ensuring that documents can be referenced in the future. The envisaged period of time should cover the entire period of time in which the possibility of having to refer to the documents will be necessary. Reasons for referencing documents may be for tax audit purposes, for judicial purposes, or for general reasons that the document is likely to be referenced for a period of time.
In the United States, for example, personal income records, which include any receipts or other evidence of deductions made, typically must be kept for three years after filing since this is usually the length of time the personal income tax return someone’s can be verified. Attorneys generally must keep all client files in good shape for six to seven years after representation ends. That’s because this is the maximum statute of limitations – the length of time after an event that someone can bring a lawsuit arising out of that event – for nearly all possible lawsuits. The constitutional documents of a company have an indefinite retention period as they are needed as long as the company is operational.
The US Legislature enacted the Sarbanes-Oxley Act of 2002 in response to several cases of securities fraud in companies that caused serious harm to investors. Sarbanes-Oxley has established several regulatory procedures that companies must follow in order to protect investors from fraud by those who manage the company. One of the most important provisions of Sarbanes-Oxley was the establishment of a seven-year retention period for all audit-related documents.
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