Colorado's Accountant-client Privilege
| Publication year | 1995 |
| Pages | 283 |
| Citation | Vol. 24 No. 2 Pg. 283 |
1995, February, Pg. 283. Colorado's Accountant-Client Privilege
Assume a client has been sued regarding the use of allegedly false financial statements. During discovery, the plaintiff requests the work papers and other documents prepared by the client's certified public accountants ("CPAs"). In addition, the plaintiff notices the deposition of the CPAs. The client believes that much of the information requested is the result of information provided to its CPAs in confidence and does not want the information disclosed. Can the documents prepared by the client's CPAs be protected, and can the CPAs be prevented from disclosing communications with the client?
In Colorado, the answer is most likely yes, if the case is pending before a Colorado state court or if Colorado substantive law applies to the claims. Colorado law has recognized the confidential nature of the relationship between a CPA and his or her client.(fn1) In general, pursuant to CRS § 13-90-107, a CPA may not be compelled to testify in a state court proceeding regarding client communications.
Complex financial transactions, and the disputes that often result therefrom, require the services of CPAs. When this relationship is or is not protected and what communications are or are not protected are important factors about which counsel should be aware when advising a client regarding the use of a financial advisor or in connection with a dispute or suit where the accountant-client privilege may apply.
The accountant-client privilege is established by statute in Colorado in the following language:
A certified public accountant shall not be examined without the consent of his client as to any communication made by the client to him in person or through the media of books of account and financial records or his advice, reports, or working papers given or made thereon in the course of professional employment; nor shall a secretary, stenographer, clerk, or assistant of a certified public accountant be examined without the consent of the client concerned concerning any fact, the knowledge of which he has acquired in such capacity.(fn2)
The purpose of the accountant-client privilege is to encourage "full and frank communication between certified public accountants and their clients so that professional advice may be given on the basis of complete information, free from consequences or the apprehension of disclosure."(fn3) This privilege is often analogized to the attorney-client privilege. However, the accountant-client privilege is not as widely recognized as the attorney-client privilege, even though the relationships are similar and the arguments that favor protection of the CPA-client relationship are the same. The privilege is limited to communications between clients and CPAs and, thus, a determination of whether the privilege will apply must begin with the identification of the "client" and the "CPA."
The statute requires the client to consent to the examination of the CPA. Accordingly, the privilege belongs to the client, not the accountant.(fn4) Who the client is, however, is not always immediately clear.
In the case of an individual who retains a CPA, it is usually clear that the individual is the client who is entitled to assert or waive the privilege. However, a question may arise when someone other than the client pays for the CPA's services. For example, in Hopkins v. People, the defendant/administrator of an estate in a criminal embezzlement trial was not permitted to assert the privilege because the CPA's review of the books and records of the estate had been paid for by the government, instead of the defendant.(fn5) The court also may consider who is directing or controlling the CPA's activities in evaluating who can assert the privilege. In People v. Zimbelman, the court held that the CPA's "activities were neither ordered, controlled nor paid for by the [defendant]."(fn6)
In addition, when two or more individuals jointly retain a CPA, the privilege
In Colorado, shareholders have limited rights of access to otherwise privileged communications between a corporation and its CPA. The...
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