Fiduciary Responsibilities of a CPA

Fiduciary duty is imposed on a person who accepts being placed in a position of great trust by another individual or entity and, as a result, is required to fulfill important legal responsibilities in exercising that trust.  

An entire body of law, treatises and related journal articles define this topic. Fiduciary duty may be imposed by statute or by the courts. It may be created (sometimes unintentionally) by a person holding out and acting in a manner that causes another individual to place special trust in that person. Often (as with CPAs or attorneys), persons held to a fiduciary standard have professional or other special expertise that a client lacks. A fiduciary is often entrusted with another's assets or is providing trusted advice in relation to those assets.

In describing the responsibility and trust elements that a person with fiduciary duty owes to another individual, judicial decisions contain such terms and phrases as: due care, loyalty, fidelity, good faith, candor, diligence, full disclosure of conflicts, professional skill and best efforts. Fiduciaries are required to perform professional or other services with all of the expertise, loyalty and due care that they possess.

Duties may include:

• A duty of loyalty to a client or other parties for whom an individual or institution is acting as a fiduciary, requiring fiduciaries to always act in the best interests of their clients or such other parties and subordinate their interests to those of their clients or such other parties.

• A duty to try to avoid conflicts of interests with the client or other parties for whom they are serving as a fiduciary and to advise them of any such conflicts.

• A duty to maintain the confidences of the client or other parties for whom they are serving in a fiduciary capacity.

• A duty of disclosure, requiring the fiduciary to advise the client or such other parties of any information that comes to his or her attention, which affects the client's interests. This would be true even if the fiduciary learns of that information in another confidential relationship. This duty underscores the need to minimize conflicts of interests.

• A duty to exercise due (professional) care in carrying out fiduciary responsibilities.

The failure to meet these responsibilities properly can subject CPAs or others held to a fiduciary standard to a lawsuit for breach of fiduciary duty.