The retention period of a document is the period of time in which the document must be stored after it is no longer being used because it may need to be referenced at some point in the future. Retention period is a term most often associated with accounting and tax documents, though attorneys are also typically required to retain client files for a period of time after the representation is ended. 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, that requires documents related to audits to be retained for seven years. Required retention periods vary not only from industry to industry, but are also varied across jurisdictions.
The reasons behind any particular retention period depend on the rules of the particular industry, but they are generally geared toward ensuring the ability to reference the documents at some point in the future. The mandated length of time should cover the entire duration of time in which the possibility of needing to reference the documents will be necessary. The reasons for referencing the documents may be for tax auditing purposes, prosecutorial purposes, or for general reasons that the document is likely to be referenced over a certain period of time.
In the United States, for example, personal income documents, which include any receipts or other evidence of deductions that were made, must typically be retained for three years after filing as that is usually the period of time someone’s personal tax filing may be audited. Attorneys must generally keep all client files in good form for six or seven years after representation ends. This is because that is the maximum statute of limitations — the length of time after an event for which someone may file a lawsuit arising out of that event — for almost all possible lawsuits. The incorporating documents of a company have an indefinite retention period as they are necessary as long as the company is in operation.
The United States Legislature enacted the Sarbanes-Oxley Act of 2002 in response to several instances of securities fraud in companies that caused serious harm to investors. Sarbanes-Oxley instituted several regulatory procedures for companies to follow in order to protect investors from fraud by those who run the company. One of the most notable provisions of Sarbanes-Oxley was the institution of a retention period of seven years for any documents relevant to audits of financial statements.