THE ACCOUNTANTCLIENT PRIVILEGE

States That Treat Client Communications as Privileged The accountantclient privilege is a state law concept that is related to the duty of confi- dentiality. Both the accountantclient privilege and the Code of Conducts confidentiality rules are designed to facilitate open communications between accountants and their clients. However, unlike the duty of confidentiality, the accountantclient privilege usually bars an accountant from ever disclosing client communications to state government authorities, even if a state court or other official demands disclosure.11 Therefore, from one viewpoint, the accountantclient privilege is broader in scope than the duty of confidentiality because it makes client communications sacrosanct and grants virtually absolute protection against disclosure. Scope What Is Covered Can a court nonetheless compel disclosure? Duty of Confidentiality Applies to all accounting engagements All information that a client reasonably expects will remain confidential, inclu- ding communications, documents, and facts observed by an accountant Yes State Accountant Client Privilege Only applies in states that have enacted this privilege Only the content of communications between an accountant and client No* Federal Accountant Client Privilege Only applies to accounting engagements in which rou- tine federal tax advice is provided Only the content of communi- cations between an accoun- tant and client concerning routine tax advice. Matters involving tax fraud or crimes are not covered No

From another perspective, however, the accountantclient privilege is narrower in focus than the duty of confidentiality because it only protects communications between an accoun- tant and a client from being revealed. That is, the accountantclient privilege essentially only protects freedom of speech between accountants and clients, whether expressed orally or in writing. The duty of confidentiality, in contrast, shields accountants from disclosing confi- dential client information. Thus, the duty of confidentiality protects from disclosure all client information, including documents, factual observations, and communications. The accountantclient privilege generally is a matter of state law. At present, about one-third of all states have enacted an accountantclient privilege law.

In your opinion

20. Should there be an accountantclient privilege in every state? Discuss the pros and cons.