Today, the AICPA Professional Ethics Executive Committee (PEEC) released an exposure draft, Disclosing Client Information in Connection with a Quality Review. If adopted, the rule would expand the instances in which members may disclose confidential client information without specific consent from a client whose engagement is subject to review to include tax practice quality reviews. Currently, the AICPA Code of Professional Conduct allows certain exceptions to the Confidential Client Information Rule (1.700.001), including when a member's firm is undergoing review of its professional practice under AICPA, state CPA society or Board of Accountancy authorization (e.g., peer review). An interpretation of that rule permits another exception to the rule when a review is performed in conjunction with a prospective purchase, sale, or merger of all or part of a member’s practice. This proposal would give similar treatment to review of a member's tax practice, a "quality review" including voluntary tax practice reviews as described in the AICPA Tax Practice Quality Control Guide. At minimum, the member should comply with Treasury regulation 7216, which allows disclosure of confidential client information without specific consent if it is provided or obtained in connection with a quality or peer review.
The exemption for quality reviews, as proposed, would be conditioned on the member meeting certain requirements:
- complies with requirements of Treasury Regulation 301.7216-2(p) related to disclosures of tax information
- if member determines that threats have not been sufficiently reduced to an acceptable level, the member should apply additional safeguards, e.g. written confidentiality agreement with reviewer or de-identify tax return information provided to reviewer
Also, the member performing the review should not use to his or her advantage any confidential client information that comes to his or her attention as a result of the review and should also refer to 301.7216-2(p) for further guidance.
Comments on the proposal are due August 20, 2018.