What Is Accountant-Client Privilege?

//What Is Accountant-Client Privilege?
What Is Accountant-Client Privilege? 2014-07-10T17:24:19+00:00

As you prepare for your career in the field of accounting, you may hear the term “accountant-client privilege.” This privilege of confidentiality between accounting professionals and their clients exists only in certain jurisdictions, but the importance of trust between accountants and clients transcends legal and geographical boundaries. As an aspiring accountant, it’s important that you understand the accountant-client privilege and the significance of confidentiality in any accountant-client relationship.

Understanding the Accountant-Client Privilege

The accountant-client privilege is a protection of private discussions between accountants and their clients from being made known to outside parties. There are, of course, some limits to accountant-client privileges. Nevertheless, the purpose of accountant-client privilege is to allow clients freedom to provide information to their accountants without limitations or fear of sensitive financial information being leaked to others. Without having all pertinent information, even the most skilled and experienced accountant will not be able to provide clients with the right advice and information for maintaining their financial stability and building their individual or company’s wealth. The existence of accountant-client privilege protects clients and enables accounting professionals to do a better job dispensing advice.

There is no federal law that establishes a national accountant-client privilege, according to the American Institute of Certified Public Accountants (AICPA). There is one statute that offers some promise of confidentiality, but only to tax practitioners who have federal authorization and only in limited circumstances. Additional doctrine, based on legal precedents established in past court cases, can also sometimes be used to establish some form of accountant-client privilege. A number of states specifically establish a legal accountant-client relationship in which certain information shared in confidence between an accountant and a client is protected, at least in part, from being revealed to third parties in instances such as lawsuits. A few states that acknowledge accountant-client privilege include Colorado, Florida, Missouri and Pennsylvania, the AICPA reported. The current legal climate suggests that more courts are now viewing accountant-client privilege as important than they did previously and even likening the accountant’s role to the client as similar to an attorney’s role, according to the Journal of Accountancy.

The Role of the Accountant-Client Privilege in the Professional Relationship

It’s important to note that while confidentiality between accountants and their clients can benefit both parties, its primary purpose is to protect the client. For that reason, a client may have the authority to waive the accountant-client privilege while the accountant does not. If an accountant violates the confidentiality of accountant-client privilege, or even if the accountant chooses not to keep the client’s confidentiality in a jurisdiction that doesn’t recognize accountant-client privilege, the client may view this as a serious violation of trust in the important accountant-client relationship .

Trust is essential to creating and maintaining a strong working relationship between accountants and their clients. The accountant-client privilege facilitates this trust, but even in states that don’t recognize accountant-client privilege, you can establish and strengthen relationships by treating clients with respect, confidentiality, and friendly and open communication.