Small businesses, startups and independent financial services continue to bloom in the U.S. economy. With this growth comes a surge of sensitive data being exchanged and stored every single day. If you also manage or work for an accounting firm, you most likely already really feel the obligation to safeguard the info. Cyber threats are no longer just a corporate issue. Accounting Firms (CPA accounting companies & independent practices) have noe become the prime targets of these attacks.
Cybersecurity compliance is necessary as part of trusted accounting services. In this blog, we will learn about cybersecurity compliance for accounting firms.
Why Is Cybersecurity Compliance Important for Accounting Firms?
Some of the most sensitive data you can think of is kept at accounting companies - Social Security numbers, business contracts, tax returns, bank accounts, employee records and other things. Hackers also know this.
Data breaches cost your firm its reputation, trigger legal actions, financial losses and lost business licenses. Even worse is that when your firm violates cybersecurity compliance requirements and you have to face regulatory fines from federal agencies.
Cybersecurity compliance is about ensuring your company's processes comply with federal, state and industry regulations. It demonstrates you have measures in place to defend client information from cyber threats.
Important Cybersecurity Regulations for Accountants
The first step toward a solid defense is understanding cybersecurity regulations. Major regulations which CPA accounting firms and small accounting practices should know are:
1. Gramm-Leach-Bliley Act (GLBA)
The GLBA requires financial institutions, including accounting companies which offer financial services or advice, to disclose information-sharing methods for their clients and also safeguard very sensitive data.
Main Requirements:
- Write an information security plan.
- Determine risk to customer information.
- Test and monitor your security systems often.
2. Federal Trade Commission (FTC) Safeguards Rule
An extension of GLBA which addresses how customer data ought to be protected. As of 2023, more stringent rules require firms to:
- Designate someone to oversee cybersecurity.
- Set up multi factor authentication.
- Encrypt all sensitive customer information.
3. IRS Publication 4557
Tax experts should protect client data. The IRS requires tax preparers to utilize basic cybersecurity to safeguard taxpayer data.
Recommendations include:
- Using strong passwords.
- Encrypting taxpayer files.
- Installing anti-malware and anti-virus software.
4. State Laws: CCPA, NYDFS Cybersecurity Regulation, and Others
In case you represent clientele in California, you might be bound by the California Consumer Privacy Act (CCPA). It concerns consumer rights and data protection.
In case you're based in New York or serve New York clients, the NYDFS cybersecurity Regulation applies to you requiring tougher cybersecurity risk management and reporting.
What Does Cybersecurity Compliance Involve for Accounting Firms?
Cybersecurity compliance may sound challenging at first glance. However, it focuses on a few important areas:
1. Data Protection in Accounting
This describes the protection of critical customer information including financial documents, tax returns and personally identifiable information (PII) - stored, shared and managed.
Simple ways to make data protection better :
- Encrypt documents and email.
- Use secure cloud services.
- Back up client information often.
2. Risk Management in Accounting Firms
Risk management is knowing where your firm is at risk for a cyberattack and repairing the gaps before something terrible happens.
You can take steps:
- Conduct regular cybersecurity audits.
- Find high risk areas like old accounting software, weak passwords or unsecured Wi-Fi networks.
- Develop action plans to fix risks fast.
3. Incident Response Plan
Even with excellent defenses, breaches occur. An incident response plan describes what your staff must do if your firm is attacked by a cybercriminal.
Your plan should contain :
- Who to call immediately.
- How to stop the attack.
- How to alert impacted clients and regulators.
4. Employee Training
Human error is the leading reason for cyber breaches. Employees must be taught to identify phishing messages, use strong passwords and also stick to your firm's security procedures.
Short regular training sessions are better than a single long boring lecture. You want cybersecurity habits to become second nature for your employees.
Common Cyber Threats for Accounting Firms
Cyber threats and accounting are connected. These are some common cyber attacks to look out for:
- Phishing Attacks: Emails purported to be from clients, banks or government organizations trick you into sharing passwords or downloading malware.
- Ransomware: Hackers lock you out of your files & demand ransom to unlock them.
- Insider Threats: Sometimes a resentful employee or careless contractor shares very sensitive information.
- Malware & Viruses: Malicious software program which infiltrates your systems and steals / destroys information.
Best Practices for Cybersecurity Compliance in Accounting
Practical measures to enhance your cybersecurity compliance include:
- Encrypt Everything: Encrypt client records, emails & backups. Without having the correct password or decryption key, encryption switches information to unusable code.
- Use MFA: MFA requires a secondary piece of data (for example a text message code) along with a password.
- Update Software Regularly: Outdated software is a very common target for hackers. Set automatic updates whenever possible to stay away from vulnerabilities.
- Conduct Regular Security Audits: Check your cybersecurity controls every few months. Find weakness before hackers do.
- Backup Data: Store backups in a secure, separate location. You will not lose everything if ransomware attacks.
- Restrict Access to Sensitive Data: Only enable access to individuals who require it. When possible, use role-based permissions.
Final Thoughts
Cyber threats aren't going to stop and cybersecurity regulations are getting tougher each year. If you want your firm to achieve success and improve long-term client relationships, understanding and adhering to cybersecurity compliance rules is essential.
Your journey to compliance need not be challenging. Begin with better encryption, risk assessments and employee training for fundamental protections. Then follow regulatory changes and improve your security posture.
Ultimately, offering accounting services means not just balancing books or filing taxes; it means protecting the data that powers your client's financial futures. Stay compliant, remain safe and show your clients they're secure with you.
