Sacramento, Calif. (April 19, 2004) -- The California Board of Accountancy is revising part of its Code of Regulations to address concerns about the disclosure to clients of outsourcing.

The CBA's Committee on Professional Conduct took up the issue last fall, after the state's legislature raised concerns about the security of client financial information being sent to third parties. As a result of its investigation, the board approved revising Sec. 54.1 of the code, which prohibits the disclosure of confidential client information without the client's consent.


The revisions require that clients must consent in writing to the outsourcing of their financial information and indicate that, when the CPA seeks the client's permission, it's clear the client knows the information may be sent to persons or entities outside of the country.


A spokesperson for the board said that it is in the process of drafting the language for the changes and plans to review the language at its May meeting. The changes are expected to take effect some time in 2005.


The CBA also updated the section of its Web site that advises consumers on selecting a CPA or a public accountant to address the issue. New additions to the section advise consumers to ask whether a CPA outsources any accounting or tax preparation services, and if so, to ask where and to whom the work is outsourced. It also advises consumers to get an engagement letter before any work is done that details the work to be performed and who will specifically perform the work - including whether, where and to whom the work is outsourced - as well as confirming that all private and personal information is secure, and specifying the cost of the services.


At its meeting next month the board will also consider additional disclosure issues, including whether there should be further disclosures to the client, such as the name or location of the contractor providing the service, the purpose of the outsourced service, and the time frame during which the information could be held and otherwise used by the contractor. The board also cited as areas of concern the information technology techniques being used to protect confidential client information, and licensee record keeping and retention practices.


-- Melissa Klein Aguilar

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