In today’s fast-paced digital world, CPA firms are increasingly targeted by cybercriminals. Why? Because CPA firms handle a goldmine of sensitive client information (Social Security numbers, addresses, and financial details) that hackers can sell or exploit. During a recent ASCPA webinar, cybersecurity expert Fady Salama, owner of SimplifyIT A-Z, provided invaluable insights into how CPA firms can protect themselves. Watch the video for the full webinar or read below for a summary of the key takeaways.

Why Cybersecurity Matters for CPA Firms

CPA firms are uniquely vulnerable to cyberattacks for several reasons:

1. High Value of Data: CPA firms store sensitive Personally Identifiable Information (PII) that can easily be monetized by hackers.

2. Billable Hour Impact: A single cybersecurity breach can lead to 16 hours of downtime per CPA, translating to thousands of dollars in lost billable revenue.

3. Reputation and Compliance: A security breach damages client trust and can lead to IRS penalties or lawsuits.

Key Threats to CPA Firms

1. Phishing Attacks: These target employees to gain access to sensitive data.

2. Ransomware: Malware that locks files until a ransom is paid.

3. Data Breaches: Unauthorized access to client information.

4. Poor Backup Practices: Without proper backups, data can be lost or corrupted.

The Cost of Downtime

Cyber incidents result in an average downtime of 16 hours. For a small firm with five CPAs charging an average of $229/hour, this could mean over $18,000 in lost revenue per event. That doesn’t even account for remediation costs, legal fees, or potential fines.

Steps to Strengthen Cybersecurity

1. Invest in Cybersecurity Insurance: A specialized cybersecurity insurance policy covers investigation costs, PR expenses, client notification, and lost revenue due to downtime. Avoid general liability endorsements, which often fall short in coverage.

2. Implement Multi-Factor Authentication (MFA): MFA adds an additional layer of security, requiring verification beyond a password, such as a texted code.

3. Use Immutable Backups: Unlike standard backups, immutable backups cannot be altered, ensuring data integrity during a ransomware attack or data breach.

4. Train Employees: Regular training on spotting phishing emails and practicing secure online behavior can significantly reduce risk.

5. Audit and Update Systems: Conduct regular audits of IT systems, firewalls, and software patches to ensure vulnerabilities are addressed.

6. Adopt Secure Practices for Off-Site Work: Ensure laptops used remotely are encrypted and that virtual private networks (VPNs) are equipped with MFA.

IRS Compliance and Data Security

Failure to secure client data doesn’t just harm your reputation, it can lead to significant IRS penalties:

• Civil fines of up to $10,000 annually under IRS Code 7216.

• Loss of e-file privileges for non-compliance with IRS Publication 4557 and Revenue Procedure 2007-40.

Compliance is non-negotiable, and ensuring proper Written Information Security Plans (WISPs) is critical.

What To Do if You’re Hacked

1. Notify affected clients immediately, detailing what data was compromised.

2. Provide credit monitoring for impacted clients, ideally for seven years.

3. Engage a professional cybersecurity team to assess and remediate vulnerabilities.

4. Contact legal authorities and follow their guidance before involving your insurance provider.

How Cybersecurity Enhances Profitability

Cybersecurity isn’t just a defensive measure, it can boost your bottom line by:

• Increasing Client Confidence: Highlighting robust cybersecurity measures attracts and retains clients.

• Reducing Downtime: Proactive measures ensure uninterrupted operations.

• Lowering Insurance Premiums: Comprehensive cybersecurity policies often reduce premiums.

Partnering with Experts

SimplifyIT A-Z specializes in cybersecurity for CPA firms. Our services include data protection, threat detection, compliance management, and employee training. Partnering with an expert ensures your firm is protected and compliant, letting you focus on what you do best, serving your clients.

The stakes are high for CPA firms. By investing in the right tools, training, and policies, you can mitigate risks and turn cybersecurity into a competitive advantage. Remember, your clients trust you with their most sensitive information—protecting it isn’t just good practice; it’s essential for your business's survival.

If you’d like to learn more, contact us for a tailored cybersecurity strategy.