Responding to Subpoenas: A CPA’s Guide to Minimizing Risk
How CPA Firms Can Navigate Subpoenas While Managing Liability Risks
Receiving a subpoena can raise complex questions for CPA firms, especially when client confidentiality is at stake. CPAs must walk a fine line between legal obligations and professional responsibilities. The Q&A below provides a clear overview of what a subpoena entails and how to respond in a way that reduces risk.
Understanding Subpoenas
A subpoena is a formal demand, usually issued during litigation or an investigation, for documents, testimony, or both. It can come from attorneys or government agencies and may carry legal weight depending on its source.
What Should CPAs Do First?
If your firm receives a subpoena, pause before responding. Review what client information may be involved and consult your risk adviser or legal counsel immediately. Your adviser will help you evaluate:
The nature of the legal matter and whether the firm has direct knowledge of the issues.
The specific demands of the subpoena: Is it requesting testimony, documents, or both? Is testifying still required if documents are submitted ahead of time?
Whether your firm actually holds the information being requested, and whether it’s confidential or protected under client privilege.
The response deadline: Is it reasonable? Has there been any communication about possible extensions?
Any recent interactions with the client or involved parties: Are there signs the firm is a witness or potentially being scrutinized?
Why Was the Subpoena Sent?
Most subpoenas are issued because the CPA may hold relevant documents or knowledge tied to a case. However, in some instances, the language or scope of the subpoena may suggest the CPA could be a subject of the investigation, not just a source of information.
Does the CPA Have to Comply?
If a subpoena is signed by a judge or issued by a government entity, compliance is generally mandatory, even without client approval. But many subpoenas are not official court orders. Instead, they may be prefilled forms from attorneys, and responding to them without taking certain steps, like securing client consent, can violate confidentiality rules such as IRS Code Section 7216. Always consult your risk advisor before proceeding.
Should CPAs Notify Their Liability Carrier?
Yes. Whether you think the information you hold is significant or minor, any subpoena should be reported to your professional liability insurance provider right away.
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We provide the following material for informational purposes only. Before taking any action that could have legal or other significant consequences, speak with a qualified professional who can provide guidance that considers your unique circumstances.