CPA-client privilege vs. the confidentiality ethics requirement.

• Author: Woehlke, James A.

Clients who consult their CPA for tax planning advice believe any communications with their CPA are privileged, i.e., what they tell the CPA cannot be disclosed by the CPA in court. But are these communications "privileged"? On rare occasions, a CPA's client will receive a letter from an attorney claiming that a law firm's preparation services are superior to nonlawyers' services because tax preparation by the attorney is privileged. Does a "privilege" apply here? The answers to these questions may surprise practitioners and their clients alike.

This column will define what exactly a professional privilege is; how it relates to the ethical requirement of confidentiality; how clients, CPAs and attorneys seem to confuse these concepts; and outline discussions currently taking place within the AICPA Tax Division as to whether the Institute should seek a tax matters privilege for clients of CPAs similar to the attorney-client privilege in tax matters.

Confidentiality

requirement vs. privilege

Professional privilege is frequently confused with the ethical requirement of confidentiality. Under certain circumstances, litigants are granted a "privilege" to object to the introduction in court of evidence relating to confidential communications with certain professionals. Privilege, then, is a shield used during litigation by the client, or by a professional on the client's behalf, to restrict access by opposing litigants to the client's confidential communications.

The confidentiality requirement, on the other hand, is a sword that can be used against a professional who makes an improper disclosure of client information. Confidentiality is an ethics requirement certain professions assume to support the character of each professional's relationship with his client.

All CPAs and attorneys are ethically bound by the requirement not to disclose confidential client information without client permission. This requirement for CPAs is spelled out in Rule 301 of the AICPA Code of Professional Conduct. That rule carves out exceptions if disclosure is necessary to

--fulfill one's obligations under Rules 202 and 203 to comply with mandatory technical standards and accounting principles;

--comply with a validly issued enforceable subpoena or summons;

--meet the requirement to have one's practice reviewed; and

--initiate an ethics complaint or respond to a recognized investigative or disciplinary body.

The second exception pinpoints the most obvious difference...