Should You Inform on Your Clients?

Source: The CPA Journal

The Dodd-Frank act provides generous cash rewards for whistleblowers – including, in some cases, accountants – who report suspected misconduct directly to the SEC. But just because accountants can report a client's misconduct to the SEC doesn't mean they should. This article reviews the rules governing an accountant's duties to keep client information confidential and to disclose fraud and other wrongdoing under certain circumstances. In some situations, disclosure can be made without liability for breach of confidentiality, in others it cannot.

Dodd-Frank protects whistleblowers, including in-house accountants, against retaliation by their employers. But it offers no protection to accountants in public practice against liability for breaching a client's confidence. On the other hand, the act doesn't prohibit rewards to accountants who disclose confidential information, except in certain cases in which a whistleblower submission would conflict with other duties to disclose that information to the SEC.

Public accountants faced with client wrongdoing should consult their states' professional conduct rules to see if there are exceptions to client confidentiality that allow them to disclose client crime or fraud.

For the complete article, read “The Accountant as Whistleblower.”

From The CPA Journal, A Publication of the New York State Society of CPAs, November 2011.