Record requests, especially by former clients, create high risk. Every year the Washington State Board of Accountancy (WBOA), because of client complaints, disciplines multiple CPAs who fail to follow the minimum requirements in the WBOA’s rule to return client records. With every record request, a CPA should carefully review and follow the minimum requirements of Board rule WAC 4-30-051.

Often client records requests are for electronic records. Under WBOA rules there are four types of records, all which may or may not exist electronically:

• “Client provided records” are accounting or other records belonging to the client that were provided by or on behalf of the client.
• “Client records prepared by the licensee” are accounting or other records (for example, tax returns, general ledgers, subsidiary journals, and supporting schedules such as detailed employee payroll records and depreciation schedules) that the CPA was engaged to prepare for the client.
• “Supporting records” are information not reflected in the client's books and records that are otherwise not available to the client with the result that the client's financial information is incomplete. For example, supporting records include adjusting, closing, combining or consolidating journal entries (including computations supporting such entries), that are produced during an engagement.
• “Licensee working papers” include, but are not limited to, audit programs, analytical review schedules, statistical sampling results, analyses, and schedules prepared by the client at the request of the CPA.

Minimum Client Record Request Requirements

When a client or former client makes a request for records, the CPA, at a minimum, must provide:

• Client provided records in the custody or control of the CPA must be returned to the client.
• Client records prepared by the licensee must be provided to the client, except that client records prepared by the licensee may be withheld if the preparation of such records is not complete.
• Supporting records relating to a completed and issued work product must be provided to the client. If any of these records have been previously provided to the client, the CPA is not required to give them again. And, a CPA is not required to give a client copies of licensee working papers. The CPA can give additional copies to the client or former client, or the CPA can provide their licensee working papers, but it is discretionary and not a requirement.

Specific Rules Relating to Electronic Records

Additional rules apply to records that exist electronically. The CPA should make a reasonable effort to provide the required information and data to the client in a format useable by the client to avoid the cost to the client of duplicate reentry. However, the CPA is not required to convert records that are not in electronic format to electronic format. However, if the client requests records in a specific format and the CPA was engaged to prepare the records in that format, the client's request should be honored. And, that if electronic records exist in a certain format, the CPA is required to provide them in that electronic format and cannot supplant existing electronic records with a different format.

A commonly requested electronic record is a QuickBooks data file. The data file is considered client records prepared by the licensee. Because each recorded transaction or entry creates a separate completed client record, the client is entitled to the data file.

Some electronic records are a combination of different types of records under the Board’s rule. For example, a tax return data file may contain depreciation data as well as review notes and internal research during the return preparation process by the CPA. The depreciation data is considered client records prepared by the licensee, but the review notes and research are considered licensee working papers.

When a client requests the tax return data file, they are entitled to the depreciation data, but they are not entitled to the licensee working papers. If the CPA does not want to convert the depreciation data to a format useable by the client, they should give the client the entire tax return data file, as it is always permissible to give more than the minimum required records. If the CPA wants to limit the information to just the depreciation data, the minimum, they should extract or convert just that data into a format useable by the client, such as Excel.

Similarly, many CPAs have self-developed Excel spreadsheets used internally to assist in the preparation of their work product and consider these spreadsheets their intellectual property. The client data in the spreadsheet is considered client records prepared by the licensee, but the Excel spreadsheet is considered licensee working papers.

When the client request records that exist electronically, they are entitled to the data but they are not entitled to the tool. Excel is a programming tool and the CPA is not required to give a copy of their electronic spreadsheet. In many of these cases the data was already provided to the client as part of the original issued work product and the CPA is not required to provide it a second time, electronically or otherwise.

You can read an entire copy of WAC 4-30-051 here.

Mark Hugh, CPA, is the principal of Mark Hugh PLLC. He is a CPA member of the Washington State Board of Accountancy. You can contact him at mark@markhugh.com.

This article appeared in the summer 2018 issue of the WashingtonCPA Magazine. Read more here.

Make sure you’re in compliance with all WBOA rules by taking your required Washington State ethics courses via the WSCPA. Learn more here.