Lesson 5-Privileged Communications, Confidentiality and Privacy Acts

Question 1

Approximately 15 states have statutorily recognized an accountant-client privilege. In those states, remember:

Answer 1

1. The privilege belongs to the client, not to the accountant;
2. The privilege can be waived by the client
3. Waiver of the privilege as to part of the communication is waiver as to all; and
4. The privilege applies only in state court, where state procedural rules apply

Question 2

Section 7525 of the Internal Revenue Code extends a modest testimonial privilege to clients of all tax advisers authorized to practice before the IRS, including accountants. Where does this apply?

Answer 2

1. Non-criminal tax matters;
2. Matters before the IRS or federal courts in cases brought by or against the United States;
   - Tax advice on state or local matters is not included nor is written advice in connection with promotion of a tax shelter.

Question 3

The federal courts and the state courts have refused to recognize a common law accountant-client testimonial privilege. True or False

Answer 3

True

Question 4

Section 7525 tax practitioners’ privilege is narrowly construed and does not apply to:

Answer 4

• information communicated to the practitioner solely for the purposes of facilitating tax return preparation.
• Legal advice is protected, but not general accounting advice.

Question 5

absent client consent, a CPA shall not disclose confidential information disclosed by clients. Exceptions are:

Answer 5

1. GAAP calls for disclosure
2. An enforceable subpoena or summons has been issued
3. An ethical examination is being conducted
4. A peer review requires disclosure
5. Disclosure is to other firm members on a “need-to-know” basis

Question 6

CPA’s may release names of clients without client consent, unless such disclosure releases confidential information. True or False

Answer 6

True