Acts Discreditable. 501-1—Retention of client records. Retention of
client records after a demand is made for them is an act
discreditable to the profession in violation of rule 501. The fact
that the statutes of the state in which a member practices may grant
the member a lien on certain records in his or her possession does
not change this ethical standard. A client’s records are any
accounting or other records belonging to the client that were
provided to the member by or on behalf of the client. If an
engagement is terminated prior to completion, the member is required
to return only client records.
A member’s workpapers including, but not limited to, analyses and
schedules prepared by the client at the request of the member are
the member’s property, not client records, and need not be made
available. In some instances a member’s workpapers contain
information that is not reflected in the client’s books and records,
with the result that the client’s financial information is
incomplete. This would include, for example, (1) adjusting, closing,
combining or consolidating journal entries, (2) information normally
contained in books of original entry and general ledgers or
subsidiary ledgers, and (3) tax and depreciation carryforward
information. In those instances when an engagement has been
completed, such information should also be made available to the
client upon request.
The information should be provided in
the medium in which it is requested, provided it exists in that
medium. The member is not required to convert information that is
not in electronic format to an electronic form. The member may
require that all fees due the member, including the fees for the
above services, be paid before such information is provided.
Once the member has complied with the
foregoing requirements, he or she need not comply with any
subsequent requests to again provide such information.
CPAs licensed in Wisconsin can’t rely
on the sentence in the AICPA Interpretation discussing unpaid fees
because the State of Wisconsin rules are stricter and the AICPA
requires CPAs to follow the state rules in such instances. The State
of Wisconsin Accounting Examining Board Rules of Conduct state that
"retention of client records after demand is made for them is an act
discreditable to the profession" (ACCY 1.401(2)(a)). There is no
exception for unpaid fees.
Most complaints regarding return of
client’s records occur during our busy tax season, and the WICPA
Ethics Committee hopes this article will help to substantially
reduce the number of such complaints. CPAs should be aware that
committing an act discreditable to the profession could result in
sanctions from the AICPA, the WICPA, the Wisconsin Department of
Regulation & Licensing, or all three organizations.
Do yourself a favor and return records
to ex-clients.
Steven E. O’ Brien, CPA
