NAVIGATING THIRD-PARTY VERIFICATION REQUESTS: BEST PRACTICES FOR CPAS

Navigating Third-Party Verification Requests: Best Practices for CPAs

Navigating Third-Party Verification Requests: Best Practices for CPAs

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As a Certified Public Accountant (CPA), you may frequently receive third-party verification requests from banks, mortgage lenders, or other entities looking to confirm a client’s financial details. While these requests are common, handling them correctly is essential to ensure compliance, accuracy, and client confidentiality. In this guide, we'll break down the best practices to navigate these requests efficiently.

What Is a Third-Party Verification Request?


A third-party verification request is a formal inquiry from an external organization seeking confirmation of an individual’s or business’s financial status. This can include verification of income, tax filings, assets, liabilities, and business existence.

Who Typically Requests These Verifications?



  • Lenders and banks – To verify income for loans and mortgages.

  • Government agencies – For tax-related or financial aid applications.

  • Landlords – To assess tenant financial stability.

  • Insurance companies – For policy underwriting and claims.

  • Employers – To confirm self-employment income.


Best Practices for Handling Third-Party Verification Requests


1. Obtain Client Authorization


Before responding to any request, always secure written consent from your client. This protects their privacy and ensures compliance with professional ethics and data protection laws.

2. Verify the Legitimacy of the Request


Scammers and fraudulent entities may pose as financial institutions. Always confirm:

  • The request is from a verified and trusted source.

  • The contact details match official records.

  • The information being requested is reasonable and relevant.


3. Adhere to Professional Standards and Compliance


CPAs must follow guidelines from regulatory bodies like the AICPA and state boards. Some key compliance factors include:

  • Avoid providing opinions on financial solvency unless supported by financial statements.

  • Only confirm facts that are verifiable with records.

  • Use standard CPA verification letter templates to maintain consistency.


4. Maintain Client Confidentiality


Never disclose financial details beyond what is explicitly authorized. If unsure, consult with legal counsel or professional accounting associations for guidance.

5. Use Secure Communication Methods


Sensitive financial data should be shared through encrypted emails, secure portals, or official mailing channels to prevent unauthorized access or data breaches.

6. Charge a Fee When Appropriate


While some verifications are straightforward, others may require significant time and effort. Consider charging a reasonable fee for complex requests, especially when reviewing financial documents or drafting custom verification letters.

7. Keep a Record of All Verifications


Maintain documentation of all verification requests, client approvals, and responses. This helps in case of disputes or audits.

Common Mistakes to Avoid


❌ Responding Without Proper Authorization


Failing to get written consent can result in legal and ethical violations.

❌ Providing More Information Than Necessary

Only disclose requested and verifiable details. Avoid offering personal opinions or additional financial insights.

❌ Ignoring Compliance Guidelines


Each state and financial institution may have unique requirements. Stay updated on regulations to avoid compliance breaches.

❌ Using Unsecured Communication


Sending sensitive information via unprotected emails or unsecured networks can lead to data leaks and legal issues.

How to Draft a CPA Verification Letter


A CPA verification letter should include:

  • CPA’s contact details

  • Client’s information (as permitted)

  • Scope of verification

  • Statement of factual confirmation

  • Signature and date


FAQs

1. Can a CPA refuse a third-party verification request?


Yes, a CPA can decline if the request is unreasonable, lacks client authorization, or falls outside their scope of work.

2. Is there a standard format for CPA verification letters?


While formats may vary, CPAs should follow professional guidelines and ensure clarity, accuracy, and compliance in their verification letters.

3. How long does it take to process a verification request?

Timelines vary based on the complexity of the request. Simple verifications may take a few days, while complex ones may take longer.

4. What happens if incorrect information is provided in a verification letter?


Incorrect information can lead to legal repercussions. CPAs should double-check all details and disclaim any responsibility for financial solvency.

5. Are there any risks involved in responding to verification requests?


Yes, potential risks include legal liability, data breaches, and ethical violations. Proper documentation, compliance, and secure communication can mitigate these risks.

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