Privileged Communications, Confidentiality, and Privacy ActsPrivilege- Flashcards
Powhattan was surprised to learn how much income his tax client, Absurdco, Inc., was making. He thought that Absurdco’s competitors might be interested in the information, so he sold it to one of them. When Absurdco found this out, it started investigating what consequences it might visit upon Powhattan. Which of the following is true?
A. Powhattan may lose his CPA license.
B. Powhattan may be sued civilly by the IRS.
C. Powhattan may be prosecuted criminally by the Department of Justice.
D. All of the above.
D. All of the above.
All of the first three choices are potential consequences of breach of the duty of confidentiality.
Wrong answer that I chose was
C. Powhattan may be prosecuted criminally by the Department of Justice.
This choice is accurate because criminal tax code penalties are a potential consequence of breaching the confidentiality duty regarding tax information, but this is not the best choice because other choices are accurate as well
Under which of the following circumstances would it be permissible for Trego to share confidential client information?
A. 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.
B. 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.
C. None of the above.
D. A and B.
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.
D. A and B.
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.
partially correct answer that I chose was
B. 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.
This answer is accurate, because disclosure during an ethical examination is a recognized exception to the confidential requirement, but it is not the only correct answer listed here.
Which of the following are recognized exceptions that allow disclosure of confidential information?
A. An enforceable subpoena has been served on the CPA..
B. An ethical examination is being conducted regarding the CPA’s conduct.
C. A peer review is occurring.
D. All of the above.
D. All of the above.
A, B, and C all list recognized exceptions to the confidentiality obligation.
Partially correct answer that I selected was
A. An enforceable subpoena has been served on the CPA.
This answer is accurate because this service of an enforceable subpoena is a recognized exception. However, it is not the best answer because B and C also list recognized exceptions.
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. A CPA firm may disclose this information if the practice is limited to bankruptcy matters, so that prospective clients with similar concerns will be able to contact current clients.
B. A CPA firm may disclose this information if the practice is limited to performing asset valuations in anticipation of mergers and acquisitions.
C. A CPA firm may disclose this information unless disclosure would suggest that the client may be experiencing financial difficulties.
D. A CPA firm may not disclose this information because the identity of its clients is confidential information.
C. 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.
Wrong answer that I selected was
D. A CPA firm may not disclose this information because the identity of its clients is confidential information.
Clients’ names are not typically thought of as being confidential. So, this answer is wrong. However, if disclosure occurs in circumstances where it would alert the world to the client’s financial struggles, then obviously the client might consider that a confidentiality breach.
