FOCUS  How certain is accountant-client

privilege?  Aubree Walton, JD, CPA

Beth Stetson, JD, PhD, CPA, is the Charles C. and Virginia Ann  and Associate Professor of  Oklahoma in Norman. She has been a member for two years.


he ongoing legal battle between the New York Attorney General (NYAG) and ExxonMobil offers a reminder of the limitations of accountant-client privilege. In 2015, NYAG Eric Schneiderman began a fraud investigation to determine whether the Texas-based company misled investors about the impact of climate change on the company’s performance.1

As part of the investigation,

Schneiderman subpoenaed accounting records from Exxon’s auditor, PricewaterhouseCoopers (PwC).2

Exxon interceded, arguing that Texas’ accountant-client privilege law shielded the records from discovery.3

Te claim of privilege

Kaimee Tankersley, JD, CPA,  the John T. Steed School of  of Oklahoma in Norman. A member for nearly two years, Tankersley previously served  and is currently serving on the 

presented several legal issues for the court. First, under a choice of law analysis, did Texas law (which provides for accountant-client privilege) or New York law (which does not recognize accountant-client privilege) control the privilege issue? Second, if Texas law controls the privilege, did it protect the documents at issue in this case?

Multistate litigation: Which state’s privilege law maintains control? State courts use different legal tests for

resolving choice of law concerns in privilege matters.4

A majority of states apply the law of the state that has the most significant relationship with the communication.5

Te remaining states

Aubree Walton, JD, CPA, is associate professor of business at Cameron University, in Lawton. A member for 16 years, Walton currently chairs   member of the OSCPA Liaisons  


utilize a territorial approach, a hybrid test or have yet to specify which choice of law standard governs evidentiary privilege disputes.6 New York uses the territorial test, applying the privilege law of the state where the legal proceeding occurs (i.e. the state where evidence is introduced or where the discovery proceeding occurs). Because New York does not provide an accountant-client privilege, PwC’s records were not protected from discovery.7

Tis result

reinforces the tenuous nature of accountant privilege, highlighting unique concerns for clients engaged in multistate transactions. Oklahoma has not yet specified a choice of law standard for privilege issues.8

If the state

elects to follow the territorial standard, parties could reasonably expect litigation in Oklahoma courts to be governed by Oklahoma’s privilege

September/October 2018

law. If, however, the most significant relationship test is adopted, litigating in Oklahoma does not guarantee accountant-client privilege will be available.

Evidentiary versus non-evidentiary state privilege statutes Even if Texas law had prevailed in conflict analysis, does the statutory text offer the protection sought by Exxon? Te New York trial court did not believe so. Although the Texas statute is titled Accountant-Client Privilege, it is a non-evidentiary statute that accomplishes little more than reciting a professional obligation to maintain client confidentiality.9


does not equate to privilege. In states with non- evidentiary privilege, accountants must carefully read statutory text to determine the parameters of protection. Texas law specifies seven instances for which accountants must produce client information to external parties, including demands pursuant to a court order.10 Other states, including Oklahoma, Florida and California, have passed evidentiary accountant-client protections that shield privileged communications in a manner similar to attorney-client privilege.11

In these states,

disclosure is protected from court order. To avoid unintentional waiver of the privilege, accountants are well-advised to consult with their legal advisors and clients before complying with third party requests.

Oklahoma’s accountant-client privilege statute Enacted in 2009, Oklahoma’s accountant privilege law has yet to receive judicial interpretation, leaving considerable uncertainty regarding the act’s scope and limitations. Te law states “a communication between an accountant and a client of the accountant is confidential if not intended to be disclosed to third parties other than: (a) those to whom disclosure is in furtherance of the rendition of accounting services to the client, and (b) those reasonably necessary for the transmission of the communication.”12

Te statute identifies an accountant as

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