Proposal would clarify exception to client confidentiality rule

By Ken Tysiac

A newly proposed AICPA ethics rule would clarify that certain reviews of a tax practice are included in the exceptions to the AICPA Professional Standards prohibition on disclosing confidential client information without the specific consent of the client.

The limited exceptions to the “Confidential Client Information Rule” (ET §1.700.001) include an exception that members who obtain a review of the member’s “practice under AICPA or state CPA society or Board of Accountancy authorization” are not required to obtain a client’s specific consent to disclose information in connection with the review.

A peer review is an example of a review that does not require a client’s specific consent for disclosing the client’s confidential information. The proposal would make clear that the exceptions to the “Confidential Client Information Rule” would include a third-party quality review (e.g., a voluntary tax practice review) performed under the monitoring requirements of the member’s tax practice quality-control document.

The proposal states that to reduce threats to compliance with the “Confidential Client Information Rule” to an acceptable level during such reviews, the member should be satisfied that the member complies with the requirements of Treasury Regs. Sec. 301.7216-2(p), related to disclosures of tax return information during such reviews.

If the member that is undergoing the third-party review determines that threats have not been reduced to an acceptable level, the proposal states that the member should apply additional safeguards. Safeguards may include entering into a written confidentiality agreement with the reviewer or de-identifying tax return information provided to the reviewer.

Under the proposal, members who perform such third-party reviews are prohibited from disclosing or using to their advantage any confidential client information that comes to their attention during the review.

The proposal was issued by the AICPA Professional Ethics Executive Committee. Comments can be emailed to Ethics-ExposureDraft@aicpa-cima.com by Aug. 20.

Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is a JofA editorial director.

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