Insightful lessons can be learned by reviewing professional liability issues. With this in mind, Gallagher Affinity provides this column for your review. For more information about liability issues, contact Irene Walton at email@example.com.
A subpoena is usually a formal request for documents and/or appearance. The request may come from an attorney in the course of litigation or by a government agency in the course of a criminal or civil investigation. CPA firms are often uncertain about how to respond to subpoenas because they also need to comply with a number of rules and regulations that are intended to protect client confidentiality.
This column focuses on understanding the nature of subpoenas and how CPA firms can minimize their professional liability exposures when responding to them.
What Should You Do if You Get a Subpoena?
A CPA in receipt of a subpoena should consider the information in the client files, along with any recent communications with the client or any parties involved, and then contact his or her professional liability risk adviser or attorney before responding to the subpoena. In evaluating the appropriate course of action for the CPA to take, the adviser may consider the following:
- What is the underlying litigation about? Does the CPA have direct or other knowledge of the issues in the litigation?
- What is the subpoena asking the CPA to do? Is it requesting testimony from the CPA, documents, or both? Does the subpoena excuse the CPA from testifying if the CPA provides the documents in advance?
- Is the CPA in possession of the information listed? The CPA should review the subpoena and consider whether the firm is in possession of the information. If the information is confidential, such as tax documents, it may be subject to claims of privilege by the client and/or an accountant-client privilege.
- Does the subpoena provide a deadline for complying? If the deadline is quickly approaching, or if the subpoenaing party did not provide sufficient time to comply, has the CPA received any communications to suggest the opposing party will grant an extension of time?
- What communication has the CPA had with the client? Has the CPA had any contact with the client, the attorneys on the case, or the governmental agency? Does that contact suggest the CPA is a target or merely a person in possession of information? Is the client taking specific measures to formally object to the subpoena?
Why Would a CPA Receive a Subpoena?
Typically, an attorney or other party will issue a subpoena because he or she believes the CPA is in possession of information and documents that will establish facts that are relevant to the underlying case. However, a subpoena may indicate that the CPA is a target in the underlying case by seeking information that could implicate the CPA as possibly liable for the matter being investigated or litigated.
Is a CPA Required to Comply?
If the CPA receives an order signed by a judge or a subpoena from a government agency, in most cases the CPA must comply. Government subpoenas generally require compliance, even without client consent or a court order.
However, most subpoenas are preprinted forms that attorneys or other parties fill out to request information.
In these cases, accountants are bound by an array of rules and regulations intended to protect clients, including Internal Revenue Code Section 7216. Under most circumstances, these rules and regulations prohibit CPAs from complying with the subpoena, unless the accountant has undertaken specific measures to protect client confidentiality, including obtaining the client’s consent.
Again, CPAs should contact their risk adviser regarding all subpoenas to evaluate the underlying litigation and the obligation to comply.
Should CPAs Report a Subpoena to Their Professional Liability Agent?
Yes. Regardless of how much or how little information a CPA may have pertaining to the client or former client, it is always important to promptly report the matter.
Mark Aubrey is claims manager with CAMICO in San Mateo, Calif. He can be reached at firstname.lastname@example.org.