New CPA Firms Ask For Your Digital Files, Do You Share?

I know. I know. If you’re like most of our clients, you never lose clients. Ever. At least you won’t admit that you lose clients from time to time. But the best of firms lose clients on a regular basis, so fess up.

Now that we’re all honest, we can focus on a question recently posed to us by one of our clients.

“When we lose a client and the new CPA firm requests copies of our digital files, do we give them up? What about when we ask the prior CPA firm for their digital files, do we get them?”

We polled CPA firms across the country on this issue and received 36 responses. 80% were in the $5-20M size range.

Do you give digital files to the new CPA firm?

• 3 to 1 were in favor of giving the digital files to the new CPA firm. A half dozen or so firms said they would NOT send QuickBooks files.
• A half dozen or so qualified their “yes” with “if the relationship with the client and/or the breakup was NOT amicable,” they would NOT surrender the files.
• 3-4 firms pointed out that they would send the files to the client, not the new CPA firm.
• 3-4 firms cautioned about sending digital or any other files that would have customized notes, review notes, diagnostics, etc. because this could lead to trouble.
• One firm allows the new firm to view the digital files on a read-only basis. Then, the firm requests copies and we scrub the files to delete any personalized items.
• One firm requires the new firm to sign a letter releasing them of any liability.

Are there any risks, legal or otherwise, that you know of or can think of?

• Almost all said no.
• The key is to scrub your files of any personalized files or documents. A key red flag here is if there was a review note or diagnostic that remained open or not satisfactorily resolved.
• 2 firms allow the new firm to come to their office and review the files without being able to make copies. The fear is that there could be exposure to third parties via court orders, regulator reviews and regulatory subpoenas.

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When you obtain a new client do you ask for the previous CPA firm’s digital files? 

• Again, roughly 3 to 1 say they ask the prior firm for files.

• Interestingly, 50% of the responding firms said their requests are successful and 50% get rejected.

• One firm said they would make the request of the client, not the old CPA firm.

• 2 firms said they prefer paper files to digital to avoid viruses.

What is your take on sharing, or receiving, digital files of clients?