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Rule 301 Confidential Client Information

In: Business and Management

Submitted By mli120656
Words 528
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Rule 301 of the American Institute of Certified Public Accountants’ professional standards states that a member CPA “shall not disclose any confidential client information without the specific consent of the client.” Auditing documentation should not be made available to outside parties without the authorizing of the client. Although the protection of a client’s information is an important principle of being professional, the member need to release the information under certain circumstance. Here are four exceptions of Rule 301:

1. Compliance with rules 202 (compliance with standards) and 203 (accounting principles) as set forth by the AICPA Code of Professional Conduct. When a member discovers criminal activity or fraud, or an activity the member reasonably expects is criminal or fraudulent based upon his or her good faith belief that there may be a crime or fraud, on the part of his client or employer, the member shall report the illegal activity or fraud to the appropriate supervisor above the person or persons who the member suspects of the illegal activity.

2. Compliance with enforceable subpoena or summons, or must comply with applicable laws ad government regulations. In practice, the member may receive informal request, Civil Subpoenas or Grand Jury Subpoenas. Not all civil subpoenas are valid or enforceable but you may need to comply the grand jury subpoenas because that is a method for a federal grand jury to gather evidence in a criminal matter sufficient to consider indictment. Whenever you are asked to respond to either a formal or informal request for information regarding a client, you should seek the advice of the legal advisor to ensure you are in compliance with such regulations. The member must inform the client about a subpoena.

3. AICPA review of professional practice. If there is a review of a CPA’s practice under AICPA or state society authorization, the member should release the appropriate information.

4. Initiating complaint or responding to inquiry made by a recognized investigative or disciplinary body.

Interpretation 301-3 address that a member who is considering selling his or her practice, or merging with another CPA, may allow that CPA to review confidential client information without the specific consent of the client. This exception do not apply to the review of working papers after a CPA has purchased another’s practice. Under this situation, the successor who wants to review the working papers should insure that the predecessor is authorized by the client to release information. To clarify the obligation of both parties, the member should take appropriate precautionary measures. For example, obtain a written confidentiality agreement. I believe, the most important principle is keeping communicate with the client. For example, it is very important to immediately notify the client when the member received a subpoena because the client may want to challenge the issuance of the subpoena.

Reference CPA Duties of Confidentiality - NYSSCPA.ORG | The Web Site of ... (n.d.). Retrieved from

Client Confidentiality and Fraud - Association of Certified ... (n.d.). Retrieved from

Improper Release of Proprietary Information. (n.d.). Retrieved from

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