CPAs and Litigation: How to Respond to Subpoenas
CPAs face the unique challenge of balancing their legal and ethical obligations to both their clients and the public when becoming involved in litigation.
By Tina Wills, Esq. | Digital Exclusive - 2021
As a CPA, being interrupted by some form of litigation is inevitable. At some point in your career, you will likely receive a subpoena seeking client information and determining the proper course of action in response can lead to a challenging balance between your legal and ethical obligations to your client and the public. How should you respond when that day comes? As with all things related to litigation, the answer is: It depends.
To start, you should refamiliarize yourself with the relevant portions of the AICPA Code of Professional Conduct. The concepts that will apply in this situation are your duty of confidentiality, your duty to exercise due professional care, your duty of integrity to not knowingly misrepresent facts, your duty to avoid conflicts of interest, and your duty to not commit any act discreditable to the profession. Of course, many other aspects of the Code may come into play depending on the facts and circumstances of the litigation and your relationship with your client. You face multiple risks if you respond to a subpoena without first seriously considering your duties, including malpractice claims by your client, censure from the court, an ethics inquiry, and putting your license in jeopardy.
What next? The Code prudently suggests consulting with legal counsel before responding to a subpoena. However, you can’t simply hand the case over to an attorney and forget about it. There are important questions you should ask yourself before you provide information. First, has your client authorized you in writing to disclose their confidential information? If not, is it legally advisable or even permissible to seek their permission prior to responding?
In the absence of client permission, you must ensure that the subpoena is valid. While the Code provides a safeguard allowing CPAs to disclose confidential client information in response to a subpoena, it also specifies that the subpoena must be validly issued and enforceable. What does that mean in layman’s terms? Broadly speaking, it means the subpoena must be issued from a court with jurisdiction over the CPA. For example, a subpoena issued from a state court in New York typically has no force or effect on a CPA who resides in and has a principal place of business in Illinois. For a state court subpoena from New York to be validly issued and enforceable for an Illinois CPA, it generally must be issued from an Illinois court. Providing confidential client information without a valid and enforceable subpoena may be construed as a voluntary act, not falling within the safeguards permitting disclosures of confidential client information in certain circumstances under the Code.
Further, even if the subpoena is valid and enforceable, the Illinois Public Accounting Act provides that a CPA “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 CPA.” In other words, a CPA does not have to disclose confidential client information and can object to producing confidential client information both under the Code and Illinois law.
If—after consultation with legal counsel, deep thought about the duties listed in the Code, and consideration of the above questions—you decide to divulge confidential client information in response to a valid subpoena, you should be careful to disclose no more than is requested by the subpoena. For instance, if the subpoena seeks only certain categories of documents, you should not produce information outside of those categories. Nor should you volunteer to provide an affidavit in lieu of sitting for deposition if a deposition is sought by the subpoena. Producing information, including documents and affidavits, outside the scope of what is sought by the subpoena can invalidate the protection you receive under the Code and can put you at professional and legal risk.
Obviously, whenever a CPA becomes involved in litigation the situation is complex and multifaceted. These are just a few examples of the issues that could arise when you receive a subpoena. If that day comes, you will be well-served by seeking legal counsel and focusing on the Code of Professional Conduct to guide you through any challenges.
Tina Wills is a partner in Freeborn & Peters LLP’s Litigation Practice Group in Chicago. She focuses her practice on complex commercial lawsuits, critical motions designed to resolve cases before trial, trials, and appeals. She can be reached at [email protected].