 Hello and welcome to the session in which we would look at few topics that are covered on the CPA exam, such as the accountant client privilege, the work papers, and the confidentiality rule between the accountant and the client. Before I start, I would like to remind you that if you are studying for your CPA exam, I strongly suggest you check out my website, rhatlectures.com. I don't replace your CPA review course. I can be a useful addition. I can add 10 to 15 points to your CPA exam score by explaining the material differently. No better, no less than your CPA review course. I can give you this alternative explanation, another option in addition to your CPA review course. Your risk is one month of subscription. Simply put, I can supplement. I can be the vitamin pill for your CPA course. Your potential gain is pass in the exam. And if not for anything, check out my website to find out how well your university doing or not doing on the CPA exam. I do have resources for other accounting and CPA sections. Please connect with me on LinkedIn and take a look at my LinkedIn recommendation. Students that already used my system to pass the exam, please like my YouTube, connect with me on Instagram and Facebook. So let's talk about the account and client privilege. And specifically, we're going to start by looking at the federal regulation or federal law. So what is the privilege, privilege communication? For example, we have an attorney, attorney, client privilege. For example, Saul right here, whatever you tell Saul, your lawyer, better call Saul from the show. They cannot testify against you. They cannot reveal this information. Why? Because you have this, we have this privilege. Now, you have to understand up front, there's no accounting client privilege. So the communication between the client and the accountant cannot be privileged. Simply put, you are not trying to protect the client. For example, the lawyer is trying to protect the client. You are not. Your job is to be neutral objective, prepare the financial statement according to the IRS rules or according to gap. So you're not really protecting the client. You are following rules and regulations versus an attorney that they will need that client privilege for sure. Okay. So if you are giving tax advice, and that tax advice is being given by a tax practitioner. So it's a tax advice and given by a tax practitioner. It means they have some sort of a license like a CPA, an attorney, enrolled agent or enrolled actuary. Then confidentiality privilege exists. Confidentiality privilege exists. Okay. The privilege is available in the following matter. If there is a civil cases. Okay. It means something to do with the internal revenue code and the penalty is monetary and federal court against the US government. The privilege apply, again, only to advice on legal issues. Okay. You have some sort of a confidentiality privilege for tax advice. Okay. Now, the privilege does not apply. This privilege does not apply to criminal tax matter. So remember, here we're talking about criminal. Once we come to criminal, if it applies, then it's you're acting like a lawyer. You're not a lawyer. If it's criminal tax matter, you cannot say the information is confidential. Okay. The private civil matter, private civil civil matter and disclosure to other federal regulatory bodies or state and local matters under those circumstances, you can throw out that confidentiality privilege that we talked about. Okay. Now, for tax shelters and reportable transaction and again criminal case, I mentioned the criminal case twice, privilege does not exist. This confidentiality privilege don't exist. Remember the reportable transactions, which are listed transaction transaction that the US Treasury believe they are either tax avoidance or tax evasion. And under those circumstances, you cannot say that information is confidential. Okay. Now, there's an exception for this. If an accountant is hired by an attorney, simply put, if soul, the lawyer, better called soul, hired an accountant to provide legal services for the case, then the client accountant client privilege will exist. But remember, the client now is the accountant. Okay. Now you have live lawyer client, the client is the accountant and the lawyer, you're hired to work for the lawyer. Therefore, everything that you do is is following the lawyer. Therefore, if you are preparing for any litigation, it is that information is privileged that information is privileged. Okay. However, sir, now, now we talked here about federal law in some states and minority of states around 15 states. There is an accountant client privilege, you know, obviously, certain low accountant lobbied and in 15 states that were able to get this privilege, but only in in a minority of states and we have to understand how these privileges work. I mean, because each state is differently, but you need to know a few things about the accountant client privilege under the state law. The privilege is to serve the client, not the accountant. So the privilege is to for the purpose of the client that obviously the client can waive the privilege if they want to because you're trying to protect them it's for their interests. And if any part of the privilege is disclosed simply put it's a total privilege or none. So if part of the privilege is disclosed by either party the accountant or the client, the privilege is completely lost you cannot no longer claim that's a privilege. Okay. Only state court not in federal court also you could be in a state, but you are standing in front of a federal judge, then this does not exist the accountant privilege under the state law don't exist because you are testifying in front of a federal judge work papers what are the work papers work papers are confidential you have that this is that this is the paper this is the accountant work to support any procedures perform evidence obtained in conclusion reach like for example when we do audit. We have we have the work paper to support the evidence. Now, those are confidential. Those are the property of the accountant those you know section a section B where we prepare Excel sheets and schedules and in the list of account receivable subsidiary ledgers so on and so forth. Those are our working papers. Now accountant is prohibited from showing the work papers except again there's always this except there is a subpoena by the court then you have to show it. It's to prospective buyer of the CPA practice let's assume someone is trying to buy the firm. They want to take a look at you know what business you have because they want to evaluate the business you can show them this but you have to block out confidential information maybe the name the social security of the client and their addresses. If you are in a defense of a lawsuit brought by a client. Okay. And I CPA or a state trial board to be used in defense of an official investigation or if gap requires it for disclosure of financial statement purposes so just know make sure you know the exceptions and you need to know the rules for If you are dealing in a non public company private company for dealing with companies you have to follow the state's status of limitation on legal action and defer from state to state for public companies you want to keep those record for at least seven years. Now we need to talk about the confidential client information rule. Well, guess what you owe a duty of confidentiality to your client per the AI CPA. Okay, simply put you must not disclose confidential information without the client consent actually there's a penalty if you do so. Okay, unless again there's always exception to the general rule exceptions disclosure for gap purposes you're okay with that subpoena by the court Basically, you are either being forced by the government or you are being forced by FASB accounting rules or the court peer review. For example, another CPA for a CPA firm is reviewing your work paper for peer review then that's fine. And within the firm itself on a need basis for example another person and the firm another partner, another tax preparer they will need the paperwork. For example, the K1 to prepare the income tax and you can that's fine you can reveal this information give it to them. 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