In examining the issue of the accountant-client privilege for the first time, the Supreme Court of Illinois recently ruled that the privilege belongs to the accountant, not the client. In Brunton v. Kruger, 2015 IL 117663 (Ill. 2015), the Court examined section 27 of the Public Accounting Act, which states:
Confidentiality of licensee's and registrant's recordsA licensed or registered CPA shall not be required by any court to divulge information or evidence which has been obtained by him in his confidential capacity as a licensed or registered CPA. This Section shall not apply to any investigation or hearing undertaken pursuant to this Act. 225 ILCS 450/27 (2014).
While recognizing the accountant’s duty of confidentiality to its client, the/; Court stated that while the client may waive the duty of confidentiality, the client may not waive the accountant-client privilege. The Court held that the privilege created by section 27 is held by the accountant and may be asserted or waived by the accountant. As such, information or evidence provided to an accountant acting in the accountant’s confidential capacity as a licensed or registered certified public accountant is privileged information held by the accountant alone.
In this case, Helen and Gordon Kruger consulted with their accountants during their estate planning process. They provided confidential information, including information about their income, assets, estate planning goals and family. The accountants in turn provided estate planning information to the attorney who prepared the Krugers’ trust and will documents. After the Krugers’ deaths, a will contest was brought by the Krugers’ daughter, June Brunton, against her brother, Robert Kruger, as trustee of the trusts and personal representative of the Krugers’ Estates, and against Robert and other family members as individuals.
Both Brunton and the Estates issued subpoenas to the Krugers’ accountants. One of the accountants at the firm complied with the Estates’ subpoenas and turned over to the Estates all of the documents in its possession that related to the Krugers’ estate planning, but refused to provide those documents to Brunton. The Court ordered the accountants to provide the documents but the accountants’ attorney refused, which led to the instant litigation. The appellate court ruled that the client was the holder of the privilege and there was a testamentary exception to the privilege. The Supreme Court of Illinois held instead that the privilege belongs to the accountant and not to the client.
Analysis of the Ruling
In so ruling, the Supreme Court of Illinois examined the Public Accounting Act, including the choice of language and history of the Act. The text of the Act was proposed by the Illinois Certified Public Accountant Society and virtually unanimously voted upon, which the Court interpreted as the Illinois legislature’s intentions to defer to the accounting profession’s own formulation of the policies and standards that should govern it. The Court stated that the Act “is expressly tied to the legislative scheme enacted to regulate the practice of the profession of public accounting in the state. This context suggests that the accountant privilege was not intended to function purely as an evidentiary rule, but also as an attribute of the accounting profession.” Brunton v. Kruger, 2015 IL 117663, P36 (Ill. 2015).
Implications for Accountants
The Court noted the one exception to the privilege, which is in instances of “investigation or hearing undertaken pursuant to this Act.” The Court stated this was the sole exception to the privilege and there is no testamentary exception to the privilege. The Supreme Court of Illinois held that the privilege survives even where the client has died and the contents of a will or trust are at issue.
The privilege can be waived by the accountant. When the accountant voluntarily discloses privileged information, he waives the privilege. The accountant in Brunton had previously provided documents to the Krugers’ Estates in response to the Estates’ subpoena. Therefore, the Court found that the accountant had to comply with the court order to disclose the same information to Brunton. Notably, the Court specifically stated that it was not expressing any opinion as to the privileged nature or waiver status of any other information in the accountants’ possession that was not previously divulged to the Estates.
Practically speaking, this case has far-reaching implications for accountants:
- Information or evidence provided to an accountant acting in the accountant’s confidential capacity as a licensed or registered certified public accountant is privileged. The privilege belongs to the accountant, not the client.
- If the client is still living, the privilege does not bar the client from voluntarily producing information. If the client is involved in litigation and the information is already in the client’s possession, a court may order the client who is in possession of the information to disclose it, providing that it is otherwise discoverable. However, a court may not order the accountant to disclose the information where the accountant has not previously disclosed that information to one of the parties in litigation.
- If the client is deceased, the accountant can still invoke the privilege, even if the information is highly relevant to the litigation.
- The client cannot waive the accountant-client privilege, only the accountant can waive the privilege. If an accountant provides documents to a party in response to a subpoena, the accountant has waived the privilege and must disclose the documents to both parties.