How Social and Digital Media Can Be a #Majorrisk
A part from the time-honored holiday newsletter, when was the last time you wrote a letter or received one in the mail? When was the last time you talked on a landline phone? Other than the rare family reunion, how many of us stay in touch with distant friends and family outside of social media? Electronic communication has substantially replaced regular mail and, to a lesser extent, the telephone, as the basic mode of communication. Whether it is sending an email, texting, instant messaging, or simply communicating on social media, electronic communication has revolutionized how we communicate with friends, family, and business colleagues. With the advent of modern technology, our thoughts and feelings can be instantly transcribed and transmitted to the world. The evolution of electronic communication has similarly affected the accounting profession. A CPA firm can market its practice and promote its brand through a well-designed website or social media outlet at minimal expense. Electronic communication also permits a free flow of ideas, industry trends, and practice tips; it connects CPAs with thought leaders in specific areas of practice and client industries. Billings can be transmitted electronically to clients for expeditious receipt, review, and, hopefully, payment. Nevertheless, electronic communication can be fraught with peril for the unwary professional. CPAs who become over-reliant on this form of communication confront increased professional liability risk. This column explores some of the more common risks CPAs may encounter with electronic communication and discusses how a professional can make appropriate use of the media while avoiding potential liability exposure. WHAT ARE THE RISKS? Increased risk for breach of confidential client information CPAs are in the unique position of having access to a variety of personal information, such as Social Security numbers, Forms W-2, tax returns, credit/ debit card data, financial account information, intellectual property, and even protected health information. As a result, a CPA can inadvertently breach client confidentiality or disseminate protected information online by merely pushing a button through casual and indiscreet use of technology. Boasting can threaten credibility CPAs, like other professionals, may exaggerate their accomplishments and capabilities on social media websites, such as LinkedIn, or on the firm's website, in an effort to bolster the practice. When a plaintiff's attorney is in the process of investigating a claim by an irate client, he or she will likely peruse online resources to obtain inexpensive and informal discovery and see how a CPA firm presents itself to the general public. A relatively defensible case on its merits may become less defensible if a CPA's credibility is called into question due to a potentially inflated online post. QUESTIONS OF OBJECTIVITY Objectivity is required by the "Integrity and Objectivity Rule" [1.100.001] of the AICPA Code of Professional Conduct for all services CPA firms provide. Moreover, independence is required for attest services. In a professional liability claim, plaintiff attorneys will use a variety of mechanisms to discredit the CPA and demonstrate that the CPA failed to maintain objectivity or, where required, independence. With electronic communications, appearance and perception are often equated with reality. Thus, the informal nature of texting, email, and social posts can seriously undermine the defensibility of a professional liability claim. The following scenario, based on an actual claim, is instructive: Example: A CPA firm was engaged to perform audits for a company. The audit partner and the company CFO were fans of two college basketball teams that had a long-standing and heated rivalry. Each year in the week leading up to the big game, the two would engage in friendly email banter and wager on the outcome. …