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Returning Client Records
Following the Rules of the Road, Both the Society’s and the Regents’

By Suvro C. K. Banerjee, Quality Assurance Manager, Ethics

Records retention issues constitute a significant number of ethics cases investigated by the New York State Society of CPAs’ Professional Ethics Committee (PEC). As a professional consideration, records retention is covered by the Society’s Code of Conduct, Section 501, Acts Discreditable, Interpretation 1—Records Retention, found at www.nysscpa.org/prof_library/ethics/Rules/codeother.htm. It is also covered by the New York State Board of Regents’ Rule 29.10, found at www.op.nysed.gov/part29.htm#29.10.

Both the Regents’ Rules and the Society’s Code require a member, upon request from a client, to return original documents received from the client; such documents must be returned regardless of whether the fee for services has been paid or the engagement has been completed. If there is an outstanding client bill, the member may seek remedy in the court system, but these documents must not be withheld from the client pending payment of or collection on a bill.

Both the Board of Regents and the Society allow the CPA to retain possession of his or her workpapers, but this comes with a caveat. If the information contained in the workpapers ordinarily would be reflected in the client’s books and records (e.g., information that is necessary to the completion of the client’s financials and is not readily obtainable by the client except through the workpapers), then the member must return this information to the client upon request as well. However, unlike in the case of the client’s original documents, the member is allowed to withhold the return of any workpapers until the client has resolved any outstanding payment issues.

In addition, both the Regents’ Rules and the Society’s Code allow the member to refuse future requests once an original request for the return of records has been fulfilled in accordance with the guidelines provided by either set of rules. The Society’s requirement for the return of client records explicitly extends to former clients; and although the Regents’ Rules do not mention former clients by name, their rules are applied to former clients as well as current ones.

The major areas of difference between the language of the Society’s Code and the Regents’ Rules is that each provides explicit terminology not found in the other that details the nature of the returned records and the parties that the obligation for return concerns. For example, according to the Society’s Code, records include analyses and schedules made by the client at the member’s request, which can be found in the member’s workpapers. The Regents’ Rules do not mention this type of documentation.

Also, the Society’s record retention rules contain a detailed discussion of the parties to whom the obligation to return records extends in the case of clients that are corporations, estates and trusts, or joint taxpayers. The Regents’ Rules don’t mention these entities. On the other hand, the Regents’ Rules explicitly list tax returns as documents that must be returned to the client upon request, and include in the list any accounting or other records belonging to the client that the member removed from the client’s premises. An additional copy of reports or other documents issued as part of the engagement must also be furnished to the clients upon request, under the Regents’ Rules. The Society’s Code does not explicitly recognize these documents as ones that must be returned, but they still would be considered client records.

Members are strongly encouraged to read both the Regents’ Rules and the Society’s Code pertaining to record retention, to be familiar with the similarities and differences between the two texts.

The professional conduct of NYSSCPA members is governed by the Society’s Code, and any violation of the Code may make the member subject to disciplinary action by the PEC. Members are also subject to the Regents’ Rules as well; any violation of these rules by a member also constitutes a violation of the Society’s Code. The Regents’ Rules on unprofessional conduct have the force and effect of law, and violations can result in suspension or revocation of licensure.