Protecting Client Information When Using Accountants in Legal Affairs | gray reed

It is well established that lawyers and their clients have the right to private and protected communications. But what level of protection are available when an accountant is used in an engagement to provide an area of ​​expertise not possessed by the attorney?

This is an important question because accountants are often seen as indispensable members of legal teams, as they have the ability to correctly interpret complex technical accounting concepts and explain them to lawyers, judges and juries. When using accountants in legal matters, the level of protection afforded will often depend on the agreement between the parties.

As a first step, parties involved in legal disputes should understand that accountant-client privilege generally does not provide the same level of protection as attorney-client privilege. Relying solely on accountant-client privilege presents substantial risks to the client. Instead, the parties should recognize and consider the benefits of entering into a Kovel’s Agreement to protect their communications.

What is a Kovel agreement?

A Kovel’s Agreement is initiated to provide the client with the strongest legal and accounting advice to support the client’s position and arguments. Moreover, the conclusion of a Kovel’s Agreement allows protections and privileges, typically limited to attorney-client interactions and work product, to be extended to accountants engaged by the attorney for more in-depth client representation. With a Kovel’s Agreementthe scope of communications and documents protected from disclosure to third parties and potential adversaries expands accordingly.

What should I do to ensure that the customer is protected by a Kovel contract?

Kovel chords are guided by specificities. Proper paper and communication trails maintain the integrity of the agreement. The legal counsel drafts the agreement, which should state that the counsel is engaging the accountant to assist in providing full legal services to the counsel’s client. The customer and the problem to be solved must be specified. Under the agreement, signed by all parties, the legal counsel is responsible for directing the accountant’s services and the accountant receives instructions from the lawyer regarding all aspects of the business arrangement. In order to protect the “work product”, the agreement must state that all working papers created by the accountant for the engagement belong to the lawyer.

Parties should be aware that if a court finds that an accountant provided the client with accounting or tax advice, even if working with an attorney, solicitor-client privilege will not apply. When lawyers and accountants work together on engagements, it is extremely important to establish that the accountant is working under the direction of the lawyer.

The items discussed above are just a few of the provisions found in a Kovel’s Agreement. It is especially important for accountants to understand the limits of accountant privilege and how Kovel chords can be used to protect their communications and work products. Accountants and their clients should always consult with an attorney who understands the nuances associated with this subject, has experience in drafting Kovel chords and protect communications with clients and accountants.

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