Law enforcement authorities and officials of regulatory agencies frequently receive anonymous "hot tips." The shy tipsters typically charge that an individual or organization has violated one or more laws or regulatory directives and demand that the "guilty" party be brought to justice. When such allegations have some minimal measure of credibility, the appropriate authorities have a responsibility to investigate the alleged wrongdoer.

In the late 1990s, the Colorado State Board of Accountancy received an anonymous letter that accused a Colorado-based accounting firm, Zaveral Boosalis Raisch, of various improprieties. The alleged indiscretions involved audit, accounting, and taxation services provided by Zaveral to two Colorado casinos. The informant charged that Zaveral had violated professional accounting and auditing standards in completing those engagements, was responsible for the clients' failure to remit federal withholding taxes and state unemployment taxes to the appropriate agencies, and caused the clients to submit improper information to the Colorado Gaming Commission.

After reviewing the allegations, the State Board launched an investigation. Among the first actions taken by the State Board was obtaining a subpoena to compel Zaveral to provide its investigative team with all relevant tax returns, financial statements, workpapers, correspondence with the two clients, reports filed with the Colorado Gaming Commission, and "all other documentation used or prepared in connection with these engagements."]

To the surprise of the State Board, Zaveral refused to comply with the subpoena. Instead, Zaveral filed a motion with a state court demanding to know whether the State Board had contacted the two clients and received their permission to obtain the requested documents from Zaveral. The accounting firm pointed out in its court filing that Colorado state law provides for privileged communications between CPAs and their clients. As a result, unless a client specifically waives that right, a CPA cannot be compelled to provide confidential information regarding the client even if a third party obtains a subpoena calling for the release of that information. In fact, Zaveral knew that its two clients had already invoked the CPA-client privilege, meaning that the clients had refused to grant the accounting firm the right to provide the subpoenaed information to the State Board. By invoking that privilege, the clients triggered a contentious court battle between Zaveral and the Colorado State Board of Accountancy.

To provide for an orderly society and the fair and expedient resolution of civil and criminal litigation, democratic nations generally impose a "duty to testify" on their citizens. However, democracies have also long recognized the need for their citizens to have a right to privileged or private communications with certain professionals. The concept of privileged communications is most often associated with attorney-client relationships. Although CPA-client communications are not privileged in cases that originate in the federal courts, 30 states have enacted laws that protect the confidentiality of CPA-client communications in litigation initiated in their courts. \({ }^{2}\) Colorado is one of those states. A Colorado state court explained that by protecting the confidentiality of CPA-client communications, the state legislature intended to encourage "full and frank communication between CPAs and their clients so that professional advice may be given on the basis of complete information, free from the consequences or the apprehension of disclosure." 3 Most state statutes that grant privileged status to CPA-client communications include various exceptions that identify specific circumstances in which this privilege is voided. The most common of these exceptions involves "accountancy board investigations." In 27 of the 30 states that recognize the CPA-client privilege, CPAs must turn over to the state board of accountancy documents requested by that agency in connection with a disciplinary or other official investigation. The three states whose enabling statutes for the CPA-client privilege do not include such an exception are Colorado, Missouri, and Tennessee. Both the Missouri and Tennessee state laws provide for other exceptions to the CPA-client privilege rule. Colorado stands alone as the only state that provides an absolute CPA-client privilege. Because of the rigorous CPA-client privilege rule in Colorado, Zaveral believed that the State Board's effort to compel it to turn over the requested information regarding the two casino clients would be rejected by the state courts.

When Zaveral refused to comply with the State Board's subpoena, the State Board filed a motion in a Colorado state court to force the accounting firm to turn over the requested documents. To support the State Board, the American Institute of Certified Public Accountants (AICPA) filed an amicus curiae or friend of the court brief with the Colorado state court. In that legal brief, the AICPA encouraged the state court to force Zaveral to comply with the previously issued subpoena since state boards cannot rigorously carry out their oversight role for the public accounting profession without the ability to access and review CPAs' workpapers and related work product. The AICPA noted that, "at the center of almost any state board investigation into a CPA engagement will be the CPA's workpapers, for it is only through careful review of the workpapers that practice quality may be effectively assessed."

The Colorado state court that presided over the dispute between Zaveral and the Colorado State Board of Accounitancy agreed with the AICPA's position. "The district court reasoned that requiring the Board to obtain client consent to a CPA subpoena would 'severely hamper' the ability of the board to carry out its statutory investigatory and disciplinary duties." As a result, the state court ordered Zaveral to provide the State Board with the client documents covered by the previously issued subpoena. Zaveral appealed this decision. The appellate court that heard the appeal reversed the lower court's ruling. In reaching this decision, the appellate court noted that it could not imply an exception to the CPA-client privilege rule since the statute that created this rule contained no exceptions, that is, the statute failed to identify any circumstances in which CPAs were not entitled to have privileged communications with their clients.

Not to be outdone by its feisty opponent, the State Board appealed the appellate court's ruling to the highest court in Colorado, the Supreme Court of Colorado, which would ultimately issue the final ruling in the case. In reviewing the case, the supreme court immediately realized that it faced a dilemma. "This case presents for our review a privilege statute which is absolute on its face and a state licensing statute granting an absolute and unqualified subpoena power to the Board." The court went on to observe that its responsibility was to review the statutes that created the mutually opposing and conflicting legal principles in an effort to determine the "legislative intent" underlying those statutes.

The Colorado state law that created the CPA-client privilege was adopted by the state legislature in 1929. According to that law, the state should provide for "inviolate" confidentiality between, or among, the parties to certain relationships.

A certified public accountant shall not be examined without the consent of his client as to any communication made by the client to him in person or through the media of books of account and financial records or his advice, reports, or working papers given or made thereon in the course of professional employment; nor shall a secretary, stenographer, clerk or assistant of a certified public accountant be examined without the consent of the client concerning any fact, the knowledge of which he has acquired in such capacity.

Three decades later, in 1959, the Colorado state legislature passed a law creating the Colorado State Board of Accountancy "to insure that persons who hold themselves out as possessing professional qualifications as accountants are, in fact, qualified to render accounting services of a professional nature." That statute granted the State Board the power and duty to investigate CPAs accused of professional negligence or other malfeasance. To fulfill this responsibility, the legislature gave "the board or any member thereof" the power to "issue subpoenas to compel the attendance of witnesses and the production of documents ... in connection with any investigation." The State Board subsequently issued a rule requiring Colorado CPAs to comply with legally enforceable subpoenas that mandate the production of client documents and other confidential information. This rule explicitly indicates that complying with such a subpoena will not subject a CPA to a violation of the State Board's client confidentiality rule.

After studying the statute that created the CPA-client privilege and the statute that created the State Board of Accountancy, the Supreme Court of Colorado then reviewed Colorado statutes that established privileged communications rules for other professional groups within the state. The supreme court found that the statutes creating privileged communications between medical examiners, nurses, and their respective clients included specific exceptions. Among these exceptions was the right of each group's state board to subpoena information needed in pursuing investigations of their licensees without first obtaining the consent of the given clients. Finally, the supreme court also noted that the Uniform Accountancy Act (UAA) recommends an "express" exception to the CPA-client privilege rule for state board investigations. The UAA is a legislative proposal sponsored by the AICPA and the National Association of State Boards of Accountancy that encourages state legislatures to adopt a uniform regulatory framework to oversee the practice of public accounting in each state.
Following its extensive study of the legal issues and statutes relevant to the Zaveral case, the Supreme Court of Colorado ruled in favor of Zaveral and refused to compel the accounting firm to produce the documents subpoenaed by the State Board of Accountancy. In reaching this decision, the supreme court observed that, "Unless and until the General Assembly [state legislature] chooses to provide the exception [to the CPA-client privilege rule for state board investigations] recommended by the Uniform Act and adopted by the vast majority of other states, the Board must obtain client consent for disclosure of information otherwise privileged by the accountant-client relationship."

QUESTIONS
1. A Colorado court opinion cited in this case suggests that in the absence of a CPA-client privilege, communications between those parties might be influenced by the "consequences or the apprehension of disclosure." Provide specific examples of how CPA-client communications might be adversely affected in the absence of a CPA-client privilege. In your opinion, why do the federal courts choose not to recognize a CPA-client privilege in litigation that originates in the federal courts?
2. Identify the parties who you believe benefit from Colorado's absolute CPAclient privilege rule and the parties who are disadvantaged by that rule. Briefly explain your reasoning for each party you identified.
3. Do you believe the Supreme Court of Colorado made the appropriate decision in this case? Defend your answer.