CPAs have an ethical duty to keep their client information confidential. Specifically, 21 NCAC 08N.0205 of the Board of CPA Examiners’ Ethics Rules provides that that a “CPA shall not disclose any confidential information obtained in the course of employment or a professional engagement except with the consent of the employer or client”. But, what if a CPA is served with a civil subpoena in a state court action requesting copies of a client’s confidential information? What steps should be taken to comply with both the ethical duty of confidentiality and the legal obligation a subpoena presents?
First, a CPA should immediately contact their client and explain the receipt of the subpoena, advising the client of the civil action in which the subpoena was issued. It is possible the client will consent to the CPA’s disclosure of the confidential information. If the client consents, then the CPA is free to disclose the confidential information requested in the subpoena. The CPA should obtain written documentation from the client indicating his or her consent to disclose the confidential information requested in the particular subpoena.
If the CPA’s client does not provide consent, does that mean the CPA is entitled to ignore the civil subpoena to preserve their client’s confidential information? No. Doing nothing and ignoring a civil subpoena is never a good idea.
A CPA needs to examine the civil subpoena carefully and determine if the subpoena was issued by a judge. On the standard North Carolina civil subpoena form (AOC-G-100) right below the signature block are various boxes for the issuing person to designate the capacity in which they are issuing the subpoena. If the subpoena was issued by a judge (either District Court or Superior Court), then 21 NCAC 08N.0205 indicates that the confidentiality rule shall not be interpreted to affect “in any way the CPA’s compliance with an order of a court”. A CPA should certainly inform the client of the fact that the subpoena was issued by a judge and therefore compliance is required, notwithstanding the confidentiality rule. Once informed of this, a client may inform his or her attorney and take whatever appropriate action they deem necessary in response to the subpoena.
If the civil subpoena is instead issued by an attorney and not a judge (as many state civil subpoenas are), then a CPA should prepare a written objection to the civil subpoena (in accordance with Rule 45(c)(3) of the North Carolina Rules of Civil Procedure) and send the written objection to the attorney issuing the subpoena. The written objection should specifically reference 21 NCAC 08N.0205 and the confidentiality rule imposed on CPAs. It is important to note that Rule 45(c)(3) requires all written objections to subpoenas to be made within 10 days of the service of the subpoena (or before the time specified for compliance if the time is less than 10 days after service). It is also highly advisable to send a draft of the written objection to the client’s attorney for review and input prior to mailing to the issuing attorney.
Once a written objection is timely sent to the issuing attorney, the issuing attorney shall not be entitled to compel the disclosure of confidential information except pursuant to an order of the court. The issuing attorney may elect to seek an order from the court compelling the production of the confidential information. If the court issues an order compelling production, then a CPA is again obligated to comply notwithstanding the confidentiality rule. Regardless, by preparing and sending the written objection to an “attorney-issued” civil subpoena a CPA has complied with its obligations to protect his or her client’s confidential information.
If you are a CPA who has been served with a state civil subpoena and need assistance in determining the proper course of action to handle your ethical and legal obligations, please contact our firm, Connors Morgan, PLLC, and one of our attorneys will be happy to assist you through this process.