On Clients and Their Files

BY ALAN RUSSELL

On Clients and Their Files

After reading “...And Nothing But the Truth: Uncovering Fraudulent Disclosures” ( JofA, July01, page 47), I take exception to the implications regarding clients who resist allowing auditors open access to files.

The article admitted that a client has the right to refuse free access and that even an honest client may resist. However, it implied that a client who does so is likely hiding something. In my opinion, there are legitimate reasons to deny free access, such as record integrity, administrative efficiency and competitive privacy.

As a corporate accounting manager previously involved in both internal audit and public accounting functions, I have real concerns about allowing anyone who is not on the accounting or finance staff free rein in the files. I do not believe audit staffs, internal or public, give consistent, proper regard to handling and protecting client workpapers and records.

Staff auditors, especially inexperienced ones, tend to hold records for the entire length of an audit—adding one more place to look if a needed file is not where it should be.

The high turnover of staff in their first few years at public accounting firms is exacerbated by the declining number of large firms and the better salaries available outside of auditing. Client confidentiality is more at risk than ever, and free access to files adds to this risk. Who is to say the second-year “Big Five” staff auditor rummaging through my files today won’t be working for a competitor next week or next month? What privileged information will he or she see that can be taken along to a competitor?

The article suggested an approach for the auditor to request free access to file cabinets—to bill it as a convenience and expense saver for the client. I believe it is condescending and deceptive to sell an approach from an efficiency standpoint when the real reason is to enhance the auditor’s investigation.

Despite having seen some attempts at dishonest or misleading disclosures as a public accountant and internal auditor, I still believe the client is right to be circumspect when it comes to auditors’ getting free access to files. I want to know which auditor borrowed each file, what condition it was in when given, where it will be while the auditor has it and when it will be returned. Anything less, and I am not doing my duty to my employer. Allowing auditors open access to one’s files makes that impossible.

Alan Russell, CPA
The Marmon Group, Inc.
Chicago

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