Responding to Client Data Breaches

Source: Journal of Accountancy

In the event of a client data breach, CPA firms are vulnerable to a variety of exposures, including damages claims, state and federal compliance costs, reputational damage, and damage to their networks. Insurance coverage of data breaches varies, so it's important to evaluate your policies and identify any gaps.

In the event of a breach – known or suspected – it's critical to assess the situation and mitigate the damage quickly. First, identify the data that may have been exposed and evaluate the severity and scope of the incident. Next, consult with legal counsel to ensure that your public relations response to the incident is effective and complies with laws requiring notification of potentially affected clients as well as state and federal regulators.

Most important, act quickly. In today's social media age, any delay can do significant harm to your reputation. In some cases, law requires you to pay for credit monitoring for potential victims, but you might want to offer to pay for credit monitoring services even if not required.

For the complete article, read “A breach of client data: Risks to CPA firms.”

From Journal of Accountancy, August 2013, www.journalofaccountancy.com/Issues/2013/Aug.