As a CPA, handling sensitive client data is part of your daily operations. With increasing cybersecurity threats and stricter compliance requirements, protecting this information is not just a best practice—it’s now a regulatory necessity.
The Federal Trade Commission (FTC) has heightened its stance on data security, and CPAs are no exception to these evolving mandates.
Understanding the FTC Ruling and Its Impact on CPAs
The FTC’s Safeguards Rule falls under the Gramm-Leach-Bliley Act (GLBA), requiring financial institutions—including CPA firms—to develop, implement, and maintain a comprehensive security program to protect client information. As part of the new ruling, CPAs are expected to incorporate more detailed technical safeguards, including:
- Risk assessments to identify and mitigate security vulnerabilities.
- Regular penetration testing assesses how effectively your system can withstand external attacks.
- Development of a Written Information Security Plan (WISP) that outlines your strategy for protecting sensitive data.
CPA firms must secure client information and document and demonstrate compliance efforts regardless of size.
The Importance of Penetration Testing
Penetration Testing (or Pen Testing) is a simulated cyber attack that allows you to identify vulnerabilities in your IT infrastructure. In other words, it’s like hiring an ethical hacker to expose weaknesses before an actual attacker does.
For CPAs, pen testing is crucial for two reasons:
Client Trust: Your clients entrust you with susceptible financial information. By proactively identifying and addressing vulnerabilities, you maintain your reputation as a trusted advisor and safeguard your firm against potential data breaches.
Compliance: The FTC now requires regular security testing to identify risks. Without ongoing testing, your firm may face hefty fines for non-compliance.
Why You Need a WISP
A Written Information Security Plan (WISP) is the backbone of your security strategy. It’s not just a checklist—it’s a living document outlining your firm’s data protection approach.
Your WISP should address:
- Administrative controls, such as access restrictions and employee training.
- Physical safeguards for protecting data on-site.
- Technical safeguards like encryption, firewalls, and ongoing monitoring.
By creating a comprehensive WISP, you demonstrate to the FTC and your clients that you have a thorough, proactive approach to security. This is no longer optional but required to ensure that your firm takes adequate steps to protect sensitive information.
What Happens if You Don’t Comply?
Failing to implement proper security protocols, including pen testing and a WISP, can result in severe consequences for your firm, including:
- FTC fines and penalties for non-compliance.
- Data breaches can lead to financial loss and reputational damage.
- Client lawsuits occur if personal or financial data is compromised due to negligence.
Steps CPAs Can Take Now
To stay ahead of the FTC requirements and protect your firm, here are immediate steps you should take:
- Conduct a thorough risk assessment to identify areas of vulnerability in your systems.
- Schedule regular penetration tests to ensure your defenses are robust and up to date.
- Develop or update your WISP to reflect security practices and ensure they are actively enforced.
- Train your team on cybersecurity best practices and compliance requirements.
With the FTC’s new ruling, CPAs can no longer afford to overlook the importance of cybersecurity. Penetration testing and a detailed WISP aren’t just regulatory checkboxes—they’re critical to protecting your business and clients from evolving threats.
Take action today to ensure your firm remains secure, compliant, and trusted in the face of increasing cybersecurity risks.
