CPAs and Client Records

By Suzanne M. Jensen

A client may request its records from a CPA for many reasons, including, but certainly not limited to, requests by federal and state agencies or because the client has enlisted a different CPA to handle its accounting and/or tax needs. Regardless of the reason, CPAs have a professional responsibility to return client records in a timely manner. Retention of client records after a demand for them has been made an act discreditable under Code Rule 501, Interpretation 501-1.

Client records consist of any accounting or other records belonging to the client that were provided to the CPA by or on behalf of the client. Work papers, such as analyses and schedules prepared by the client at the request of the CPA, are considered the CPA’s property and need not be returned to the client. However, there are some instances when the client’s financial picture is incomplete without information included in a CPA’s work papers. In these instances, and when the engagement has been completed, such information should be made available to the client upon request. A CPA may require that all fees due for completed engagements be paid prior to release of this type of information. If an engagement is terminated prior to completion, the CPA is only required to return client records.

A CPA’s obligation under Rule 501-1 to return a client’s records upon request applies to former as well as current clients. If the client is a corporation, the obligation is to the corporation’s duly appointed representative, and not to the stockholders. In the case of an estate or trust, the obligation runs to the fiduciary and not to the beneficiaries. In partnership issues or matters involving joint tax returns, the obligation is to the party who engaged the services of the CPA.

A CPA who has complied with a request for client records is not required to comply with subsequent requests for the same information.

The issue of returning client records in a timely manner is often the center of controversy. Typically, by the time the New York State Society of CPAs’ Professional Ethics Committee (PEC) receives a letter asking for assistance in the retrieval of client records, several requests for the return of those records have occurred with no satisfaction by the client. In most instances, when a PEC member contacts the CPA in violation, the client’s records are then sent. In these situations, the PEC generally recommends some form of corrective action for the CPA in violation, such as the completion of the American Institute of CPAs’ 11-hour self-study course on ethics, with a grade of 90 or better. Failure to comply with the corrective action could result in expulsion from membership in the Society.