Testify! Tips CPAs should know when responding to subpoenas.

• Author: Parisi, Ronald C.
• Position: Professionalissues

as the "most trusted adviser," CPAs are privy to a company or individual's proprietary information or processes. So if things go wrong, CPAs may be called upon to testify in court. But they should have no fear. There are some things CPAs can review before stepping into that witness box.

Although CPAs should indicate their interest in cooperating with subpoenas and other requests for information, it's appropriate to defer any comments or release of records until they receive advice from an attorney or professional liability insurance risk adviser. There are numerous reasons why, including:

* Some subpoenas require documents, some require testimony and some require both. Here are some proactive guidelines:

* Do not volunteer information. CPAs will be violating rules of the Internal Revenue Code and AICPA if they provide more than what is requested in the subpoena.

* CPAs should not give interviews to an agent if the subpoena requests documents only; nor should CPAs give an interview without first seeking legal guidance.

* Be sure that the documents being produced fit the description of the documents requested in the subpoena.

* Never volunteer documents or other information before the due date staled on the subpoena without first consulting a qualified attorney or professional liability insurance risk adviser.

* Not all subpoenas or information requests are valid and enforceable, and it can be difficult to determine from their face whether they are valid or enforceable.

* Do not assume that the subpoena is proper just because it appears to be legal. CPAs could err by improperly responding to an invalid subpoena.

* At the same time, do not ignore a subpoena, which can result in difficulties, including court-imposed penalties or fees.

* Even if the subpoena is valid, it might not meet IRC requirements for release of client tax information. Simply complying with a subpoena could result in fines or penalties and may expose a CPA to liability from the client.

These are practical guidelines only, not legal advice. CPAs should seek legal advice before taking any action or making any related decision.

It is also important for CPAs to notify their professional liability insurance company to assure their coverage in the event of a claim.

Real-world Example

Here is a real-life example of a case involving a CPA who had been engaged by the trustee of a substantial family trust for a few years. It illustrates the complexities that can arise when responding...