12-Privileged Communications, Confidentiality, and Privacy Acts Flashcards
A husband prepared his own tax return as married filing separately. His wife hired a CPA to prepare her tax return as married filing separately and asked the CPA not to disclose the information to anyone. The CPA was not retained by the husband for any tax work. The husband believed that his wife’s tax return was negligently prepared and that he was financially harmed. He hired an attorney, without his wife’s consent, to pursue a negligence claim against the CPA. The CPA hired an attorney to defend against the negligence claim. To which party, if any, may the CPA disclose the wife’s tax return information without the wife’s consent?
The CPA’s attorney, for the evaluation of the negligence claim.
Tax accountants owe their clients a duty of confidentiality, but it is only fair that the CPA be able to defend himself or herself in the malpractice lawsuit by the husband. Doing this typically will require disclosure of important documents to the CPA’s attorney.
Which of the following are recognized exceptions that allow disclosure of confidential information?
📌An enforceable subpoena has been served on the CPA.
📌An ethical examination is being conducted regarding the CPA’s conduct.
📌A peer review is occurring.
A, B, and C all list recognized exceptions to the confidentiality obligation.
Trego is a CPA. Under which of the following circumstances would it be permissible for Trego to share confidential client information?
📌He has been hospitalized on April 14 and needs to share information with his partner, Tandy, who will complete a client’s tax return before the April 15 deadline.
📌A client has filed a complaint with the State Board of Accountancy about Trego’s work, and he needs to show the Board confidential information to prove that he acted professionally throughout the engagement.
Two recognized exceptions to the confidentiality requirement are disclosure to other firm members on a need-to-know basis and disclosure during an ethics examination.
Jetmore was surprised to learn how much income his tax client, Quantilco, Inc., was making. He thought that Quantilco’s competitors might be interested in the information, so he sold it to one of them. When Quantilco found this out, it started investigating what consequences it might visit upon Jetmore. Which of the following is true?
📌He may be sued civilly by the IRS.
📌He may be prosecuted criminally by the Department of Justice.
Both of the first two choices are potential consequences of breach of the duty of confidentiality when it involves taxpayer information.
Which of the following is a correct statement about the circumstances under which a CPA firm may or may not disclose the names of its clients without the clients’ express permission?
A CPA firm may disclose this information unless disclosure would suggest that the client may be experiencing financial difficulties.
Generally, the mere name of clients is not confidential information. Therefore, unless the accountant knows (or has reason to know, given the circumstances) that the client wishes to keep its identity as a client confidential, this information may be disclosed. An accountant would have reason to know there was a problem if disclosure of the client’s name informed the world that the client was experiencing financial difficulties.
