Legacy Law Blog

Certified Public Accountants (CPAs), bookkeepers and tax attorneys are often the first people asked to produce financial records when a dispute turns ugly. Divorce cases, owner disputes, valuation fights and tax controversies all create the same instinctive reaction: subpoena the accountant’s file.

In Michigan, that move can run straight into MCL 339.732, which protects information connected with a covered accounting engagement unless the client or other authorized person gives written permission.

MCL 339.732(1) states:

Except by written permission of the client or the heir, successor, or personal representative of the client to whom the information pertains, a licensee, or a person employed by a licensee, shall not disclose or divulge and shall not be required to disclose or divulge information relative to and in connection with an examination or audit of, or report on, books, records, or accounts that the licensee or a person employed by the licensee was employed to make. Except as otherwise provided in this section, the information derived from or as the result of professional service rendered by a certified public accountant is confidential and privileged. [Emphasis added].

This statute is still the starting point in 2026 and the basic framework for any determination for what client information can be disclosed by a CPA to a third party. Michigan continues to treat the accountant confidentiality rule as a real limitation on compelled disclosure, not as a mere courtesy.

The Statutory Rule

MCL 339.732(1) provides that, absent written permission from the client, heir, successor, or personal representative, a licensee or the licensee’s employee “shall not disclose or divulge” and “shall not be required to disclose or divulge” information connected with an examination, audit, or report on books, records, or accounts that the licensee was employed to make. The Michigan Association of CPAs still describes the statute in those terms, and the core text remains unchanged for current practice.

Because there was no accountant privilege at common law, Michigan courts have treated the statute as a derogation of the common law and therefore strictly construed it. That point comes from People v Simon, which remains the best citation for the rule of construction.​

Why A Subpoena Is Not Enough

A subpoena may force an appearance, but it does not automatically create a right to the documents or testimony if the statute applies. The statute does not say “unless you are subpoenaed,” and the accountant’s duty to preserve confidentiality is not erased by a routine discovery demand.​

In practice, that means counsel should not assume contempt threats will solve the problem. The safer course is usually to determine whether the client can be asked directly for the material, whether written permission can be obtained or whether the information can be produced in a nonprivileged form from another source.

Key Michigan Cases

Three Michigan cases anchor the analysis regarding when accountants can be compelled to produce privileged information. People v Simon supplies the strict construction principle where a CPA possesses information related to a client and non-client (i.e. husband and wife). Harwood v Randolph Harwood, Inc. supports the idea that where both sides are truly the client, one cannot use the statute against the other to prevent disclosure. People v Paasche addresses the crime-fraud limitation and is still the principal cited authority for that exception.​

Here is how those cases still function in 2026:

• People v Simon, 174 Mich App 649 (1989), is the leading case for the proposition that the statute must be strictly construed because it is derogated by the common law.​
• Harwood v Randolph Harwood, Inc., 124 Mich App 137 (1983), remains important where both disputants are part of the same client relationship, such as jointly engaged spouses or co-owners.​
• People v Paasche, 207 Mich App 698 (1994), remains the main Michigan case on the crime-fraud exception in this setting.​ This exception allows a CPA to disclose information relating to an ongoing or future criminal act. Prior criminal acts are not covered by this exception.

When The Exception May Apply

The common-client scenario is still one of the most useful exceptions. If the accountant truly represented both parties as the client, neither should be able to use the privilege against the other in the way a stranger to the engagement could. That is the core lesson of Harwood.​

The crime-fraud exception remains narrow. Paasche supports the proposition that the exception does not open every historic file. It is aimed at information tied to ongoing or future wrongdoing, not simply embarrassing past conduct. The emphasis on timing and purpose still reflects the law as practitioners use it today.​

Federal Tax-Practitioner Privilege

For federal tax matters, the separate privilege in 26 U.S.C. 7525 still matters. The statute extends a limited confidentiality privilege to certain communications with federally authorized tax practitioners, but only in noncriminal tax matters before the Internal Revenue Service (IRS) and in noncriminal federal tax proceedings involving the United States.

That privilege is narrower than many clients assume. It does not apply to communications promoting tax shelters, and it is limited to tax advice in the statutory sense. For current practice, that means a CPA file may contain some protected tax-advice communications, but the privilege is not a blanket shield for all workpapers, return-prep materials or underlying source documents.

Current Practice Points For 2026

Before subpoenaing a CPA file, identify whether the request seeks protected engagement communications, whether the client has waived the protection and whether the information can be obtained from the client directly or from a nonclient source.

One current update worth noting is that the federal privilege analysis under IRC 7525 remains highly relevant in tax controversy work, especially for non-criminal IRS matters. Recent commentary and the current code text continue to emphasize that the privilege is limited and should be analyzed separately from Michigan’s accountant confidentiality statute.

Practical Takeaway

For CPAs, bookkeepers and tax attorneys, the safest rule is this: do not treat an accountant subpoena as routine until you have done the privilege analysis. Michigan’s MCL 339.732, together with Simon, Harwood and Paasche, still governs the state law side of the issue, while IRC 7525 controls a narrower slice of federal tax communications.

In other words, a subpoena may get the accountant to the courthouse, but it does not necessarily get the file.​