There are, I am certain, times when you feel your client is holding something back and depending on the seriousness, it could get them (and you) into big trouble. So how do you have this conversation and what are your options?
I’m Their CPA What Are My Risks?
Most people aren’t cut out to be master criminals, they get found out sooner or later and will cheerfully throw you under the bus to save their own skins. You’ve heard the expression: “What did you know and when did you know it?”
However, it is virtually impossible to prove what you did not know at a given point in the past. Meanwhile, your client may add fuel to the fire by protesting ignorance. “My CPA never told me this was wrong.”
What Do We Know?
First, you need to understand the scope of the problem. A client might not be making estimated tax payments on time. In that case, the risk might only be penalty charges. Clients committing fraud, paying bribes to secure contracts, signing someone else’s name to documents or keeping two sets of books are in another category entirely.
My Secrets Are Safe With My Accountant
Clients may be under the impression you are bound by confidentiality and group you into the same professional class as physicians and lawyers. “Federal law does not recognize a general accountant-client privilege. Even if certain states do, there’s often a crime/fraud exception.” Clients need to understand you aren’t bound by the seal of the confessional.
My Client is a Large Company. What Should I Do?
There’s an accepted industry procedure for taking action. In general, accountants who see evidence of fraud should first take it up through the client’s company chain of command, all the way to the audit committee of the board. Under certain circumstances they can choose to override client confidentiality because CPAs have a “primary responsibility to honor the public trust and act in its best interests.”
If you work for a larger firm, it’s likely they have a Compliance Officer. The financial services industry has a saying: “Have a problem? Get a partner.” Bring them into the picture.
Having a Conversation with Your Client