Application of Accountant-Client Privilege in State Courts

Accountant-client privilege does not exist under federal law and under common law. Generally states do not recognize an accountant-client privilege.  However, under certain circumstances communications made to an accountant is privileged.  In Orix USA Corp. v. DVI Inc., 1997 Pa. Dist. & Cnty. Dec. LEXIS 60 (Pa. C.P. 1997), the court held under Pennsylvania law, accountant client privilege exists.  The purpose behind the accountant-client privilege is to protect disclosing the substance of information conveyed by the client to the accountant.  The court further held that, the privilege ceases to operate when the communication made by client is used by accountant in furtherance of fraud.

In Indiana the accountant-client privilege belongs to client and not to accountant[i].  In Sears, Roebuck & Co. v. Gussin, 350 Md. 552 (Md. 1998), the court held that under Maryland law, an accountant should not release a protected information without the express permission of client.  The court further held that the accountant-client privilege could be waived by the client’s conduct.  For example, the privilege may be waived by client’s disclosure to third parties.

In Ernst & Ernst v. Underwriters Nat’l Assurance Co., 178 Ind. App. 77 (Ind. Ct. App. 1978), the court held that four basic conditions of social policy must be satisfied to bring an action on the ground of communication.

  • Communications should originate from a confidence that they would not be disclosed.
  • Element of confidentiality is essential to maintain the relation between the parties.
  • The relation between the accountant and client must be one which in the opinion of the community is a good one.
  • The injury occurs to the relation by the disclosure of communications is greater than the benefit gained.

The attorney client communication is a privileged one.  However the fact that an accountant is also an attorney does not protect communications made by a client to a person in his/her capacity as an accountant[ii]

[i] Ernst & Ernst v. Underwriters Nat’l Assurance Co., 178 Ind. App. 77 (Ind. Ct. App. 1978)

[ii] In re Grand Jury Subpoena Duces Tecum Issued on June 9, 1982, to “Custodian of Records“, 697 F.2d 277 (10th Cir. Okla. 1983)


Inside Application of Accountant-Client Privilege in State Courts