March 2015
Summary: The Illinois Supreme Court in a recent ruling upheld that the accountant is the holder of the privilege, that a common law testamentary exception does not breach the accountant’s privilege, and that the accountant’s privilege can be waived when the accountant discloses information to a party.
Background: Sect. 27 of the Illinois Public Accounting Act provides for an Accountant’s Privilege wherein a licensed or registered CPA will not be required to disclose information obtained in their capacity as a CPA. Operatively, it is the CPA who invokes and holds the privilege and not the client.
Illinois Public Accounting Act, 225 ILCS 450/27§27. A licensed or registered certified public accountant shall not be required by any court to divulge information or evidence which has been obtained by him in his confidential capacity as a licensed or registered certified public accountant. This Section shall not apply to any investigation or hearing undertaken pursuant to this Act.
The issue of who owns the Accountant’s Privilege was raised in Brunton v. Kruger in an estate dispute before the Circuit Court of McLean County. On appeal, the 4th District Appellate Court held that the client owns the privilege and created a testamentary exception to the Accountant’s Privilege. Generally speaking, the testamentary exception permits a breach of the privilege when a deceased client’s financial affairs in a suit between the client’s heirs, devisees, or other parties who claim by succession from the deceased client.
Brunton v. Kruger (No. 117663)The Illinois Supreme Court concluded that the accountant’s privilege included in the Illinois Public Accounting Act is not part of a legislatively created body of evidentiary privileges for other professions but rather is “an attribute of the accounting profession.” The Court went on to rule that as a part of the legislative scheme enacted to regulate the accounting profession, the common law “testamentary exception” which is used to defeat the attorney-client privilege may not be used to defeat the accountant’s privilege.
This is a significant case for the CPA profession as there is very little authoritative case law interpreting the accountant’s privilege. The Supreme Court’s holding in this instance is authoritative and preserves that the accountant is the holder of the privilege. Notably, the Supreme Court cited the work of the Illinois CPA Society in reenacting and updating the Illinois Public Accounting Act. The Court recognized that the impetus behind the adoption of the Act and the privilege came from the accounting profession and not a legislative concern about evidentiary rules of the Code of Civil Procedure which typically create privileges.
ICPAS Legal Takeaway: CPAs will need to think about the privilege and the unintended waiver of that privilege. This means if subpoenaed, CPAs must carefully consider from the beginning disclosure of documents that could lead to waiving the privilege. Procedurally, the Court has a few weeks to issue a modified opinion but modification rarely occurs. ICPAS will continue to closely monitor and keep you informed of any modifications.
The Illinois CPA Society thanks the law firm of
Pretzel & Stouffer, Chartered of Chicago for their cooperation with ICPAS. The Pretzel litigation team of Matthew Tibble and Robert Chemers very ably and professionally represented the appellant CPA firm throughout the litigation process.