Under normal circumstances a CPA does not require representation when advising a client or a client’s attorney about a potential criminal matter. However, in certain circumstances it would be wise to seek representation based on the nature of the services performed, the questions asked, or any other concerns the CPA may have, according to the AICPA tax division’s criminal practice guide. Ethical requirements for CPAs in the face of possible criminal tax issues raised by a current or potential client is the ripest area of concern. In such instances, the CPA should evaluate whether a potential conflict of interest exists with respect to performing ongoing services for the client.
In the face of jail sentences and large financial penalties, a CPA should resist the urge to fully investigate a potential criminal tax matter because the CPA can be forced to testify against the client. Because of the fiduciary relationship between client and CPA, the CPA is often the most damaging witness the government can present. Alternatively, a tax attorney enjoys special privileges meant to protect potentially incriminating communications by the taxpayer from being disclosed and that also prevent documents prepared in anticipation of trial from being discovered.
Because of the high stakes consequences to both the client and CPA, It is important for CPA’s to know the legal and ethical issues surrounding criminal investigations and prosecutions in order to know when referral is needed as well as to protect themselves from their own ethical, civil and criminal exposure.