For the professionals whose lives revolve around April 15th, there is a world of risk and opportunity. The landscape of financial management–with CPAs at the forefront–has evolved significantly.
With an increasing reliance on technology, businesses are facing both massive opportunities and unprecedented challenges – especially in the realm of cybersecurity. As threats become more sophisticated, the need for robust cybersecurity measures has never been more critical.
CPAs have been given official guidance on protecting taxpayer data via IRS Publication 4557. In addition, the FTC expanded the definition of “financial institutions” to include tax prepares as part of the Gramm-Leach-Bliley Act. CPAs must comply with the FTC Safeguard Rule as of 2023.
Let’s explore how your CPA firm can play an active role in managing cybersecurity threats for both the financial integrity of your clients and your firm’s security.
Understanding Cybersecurity Threats to CPAs
When you’re in the business of finances and sensitive personal information, you are a sure target for money-hungry cybercriminals. No surprise there. As a CPA, yes – you are a target, but here’s the truth: you don’t have to be a victim.
The first step to proactive cybersecurity measures is clearly understanding the risks. Here are the three main types of attacks:
- Computer Fraud: Using a computer to fraudulently transfer covered property through unauthorized and intentional use of corrupt code by an outside party.
- Funds Transfer Fraud: A fraudulent instruction directing a financial institution to transfer, pay, or deliver money or securities.
- Social Engineering Fraud: The intentional misleading of an employee (including managers, partners, owners, shareholders, proprietors, directors, officers, trustees, or governors) through the use of a communication by a party who is not an employee, client, or vendor, but pretends to be.
To address these risks, firms need to put measures in place that cover both the technology and the people using it. Security measures must proactively detect risks and vulnerabilities (i.e., phishing, ransomware, and beyond).
How can firms use technology and personnel to accomplish this? Let’s cover this.
6 Ways CPAs Can Manage Cybersecurity Threats
Cybersecurity breaches can have devastating consequences for businesses, ranging from financial losses to reputational damage. Given the sensitive nature of financial data, CPAs play a pivotal role in protecting their clients’ assets and maintaining trust in financial systems. Here’s how CPAs contribute to managing cybersecurity threats:
- Risk Assessment and Management: All CPAs should be working with a qualified managed IT service provider. Your partnered provider should conduct risk assessments to identify vulnerabilities in financial systems and processes. By evaluating your cybersecurity posture, your MSP can pinpoint potential weaknesses and develop strategies to manage risks effectively.
- Compliance and Regulation: In an increasingly regulated environment, compliance with cybersecurity standards and regulations is non-negotiable. CPAs must stay abreast of the latest regulatory requirements and ensure their clients adhere to industry-specific standards such as the Sarbanes-Oxley Act (SOX) or the Payment Card Industry Data Security Standard (PCI DSS). Managed Service Providers (MSPs) must make sure your technology infrastructure is set up in such a way that supports compliance and regulatory standards for the financial industry.
- Financial Reporting Integrity: The integrity of financial reporting relies on the confidentiality, integrity, and availability of financial data. CPAs play a crucial role in ensuring the accuracy and reliability of financial information by implementing controls to prevent unauthorized access or manipulation of data. By maintaining airtight financial reporting processes, CPAs bolster the trustworthiness of financial statements and protect against fraudulent activities.
- Cybersecurity Awareness and Training: Human error remains one of the leading causes of cybersecurity breaches. CPAs recognize the importance of cybersecurity awareness and provide training to their client’s employees to foster a culture of security consciousness. Lean on your MSP partner to help educate stakeholders about the latest cyber threats and best practices for prevention. This will empower your employees to identify, report, and defend against attacks effectively.
- Incident Response and Recovery: Despite robust preventive measures, cybersecurity incidents can still occur. In the event a cyberattack occurs, an existing relationship with an MSP is critical in orchestrating swift incident response and recovery efforts. CPAs can support these efforts by using their expertise in forensic accounting and data analysis to help investigate the source of the breach and mitigate damages as quickly as possible.
- Continuous Monitoring and Improvement: Cybersecurity is not a one-time endeavor but an ongoing process that requires constant vigilance. CPAs continuously monitor their clients’ cybersecurity posture, regularly assessing and refining strategies to adapt to emerging threats. By staying proactive and agile, CPAs help businesses stay one step ahead of cyber adversaries and maintain resilience in the face of evolving challenges.
Protecting Your Digital Footprint
A smart, nimble, proactive cybersecurity strategy has broader implications for a firm than just data safety. It can impact a firm’s future ability to grow. Committing to developing and enhancing a cybersecurity framework can make all the difference in your firm’s future.
CPAs play a vital role in safeguarding financial integrity and managing client risks. As cyber threats continue to evolve, CPAs will remain at the forefront of efforts to fortify financial systems and uphold trust in the integrity of financial information.
With a long history of supporting CPAs as they prioritize cybersecurity, PK Tech is here to help. We service small to medium-sized businesses in the Greater Phoenix Area. Book a complimentary call with a member of our team today.
You can also evaluate your firm’s FTC Safeguards Rule readiness by taking our quiz.