For CPA Firms: Don't Let Security Issues Disrupt Tax Season
April 06, 2022
financial services accounting
Referring to tax season as the most stressful period for CPA firms undersells the magnitude of what you deal with. In addition to making sure your software works without any hitches and that your staff keeps their cool, you're constantly under threat from enterprising hackers looking to exploit vulnerabilities in your tax software. Because of that, it’s imperative that CPA firms take a more aggressive approach to protecting their systems and servers.
The Cost of Poor Security For CPA Firms
The attack on Colonial Pipeline earlier this year highlights the ongoing threat that crops up when companies have lax security policies in place. A 2021 Cost of a Data Breach report from IBM showed that data breaches ended up costing companies $4.24 million. In addition, organizations where remote working played a factor in the data breach ended up losing an additional $1.07 million on average.
Incidents involving accounting data typically require a lot of time and resources to correct. Even then, firms may not always recover the information they lost. The costs associated with security issues for CPA firms include:
- Revenue from data loss
- Paying back customers
- Legal fees
- Loss of clients
- Fees for delayed payments
CPA companies that work for larger organizations present an optimal entry point for hackers. They count on smaller firms not having robust security policies in place. Because of that, your firm could present an opportunity for them to get inside the systems of one or more of your corporate clients.
That risk is one reason why many organizations looking to hire a CPA firm require that they fall in line with SOC 2 compliance standards. It pays to have services available that prepare your CPA firm to undergo a potential SOC 2 compliance audit.
Tips for CPA Firms On Maintaining a Robust Security Posture
The following recommendations can help you avoid having security issues throw a wrench into the upcoming tax season for your CPA firm.
1. Perform Risk Assessments
Every CPA firm should make risk assessments part of their security procedures. They help you figure out how likely you are to become the victim of a cyberattack. In addition, regular risk assessments help you locate blind spots that could be ripe for exploitation by hackers like:
- Failing to delete old files that are no longer legally or commercially relevant
- Not putting adequate protections around personally identifiable information (PII) like social security numbers
- Not following PCI DSS data security standards for accepting card payments
Another benefit of risk assessments is that they keep you focused on future organizational needs. Your risk assessment can become the template used to conduct future reviews and any changes necessary to meet the growing needs of your business.
2. Invest in Quality Software and Security Solutions
Companies looking to save on operational costs may look to cut corners when it comes to their accounting software. However, whatever savings you end up with in the short term could end up completely wiped out in the event of a data breach or other security event.
Remember, the IRS comes down hard on tax professionals who fail to protect client data. That makes it doubly important that you back up the internal security of your accounting software with additional cybersecurity controls that help you perform functions like:
- Recognize phishing emails that tempt employees into giving up valuable credentials
- Set and enforce strict password policies that require users to create strong passwords
- Encrypt all sensitive emails and files
- Backup systems regularly in case of data loss
- Wipe out old hardware like laptops, desktops, hard drives, and even printers that could hold sensitive customer info
3. Set Up Security Monitoring
Around-the-clock security monitoring of essential company networks and systems helps you recognize potential issues and act immediately. Your security monitoring should include intrusion detection and reviews of security logs of databases, essential software, servers, etc.
It pays to automate as much of your security monitoring infrastructure as possible. Conduct reviews of security alerts in real-time to avoid the potential of intruders making their way into your CPA systems without your knowledge.
4. Control Access To Your Systems
It’s not just about the security of your CPA firm's accounting systems. Conduct a review of the security policies of clients and vendors with access to your system. If they’re not taking steps to implement basic cybersecurity protocols, they put you at risk for a data breach or worse.
In addition, limit administrative control to as few people as possible. More people with that level of access means more opportunities for cybercriminals. Administrators should have separate non-privileged accounts to perform daily functions. That way, hackers have a more challenging time accessing their credentials to conduct an attack.
5. Create An Incident Response Plan
Have an incident response plan in place for your CPA firm. It goes over the procedures, steps, and responsibilities of how companies should approach a cybersecurity incident. The National Institute of Standards and Technology (NIST) outlines four phases for incident response. You should cover all of them in your incident response plan.
- Preparation — This is the work put in by your CPA firm to prepare for a security incident. It outlines the tools and resources available along with the training provided to your team. You should also document work done to prevent incidents from occurring.
- Detection and analysis — Goes over how to accurately detect and review incidents, including whether one actually occurred, the type, and level of severity.
- Containment and eradication — Stop the effects of the incident in its track before it can spread to damage other parts of your CPA firm.
- Post-incident recovery — Goes over the lessons taken from dealing with the incident among all parties involved. Use this as an opportunity to improve overall security and how your security team handles incidents.
Get The Best Cybersecurity Protection System Available for Accounting Firms
Havoc Shield gives small and medium-sized CPA firms the powerful security infrastructure necessary to comply with the industry's standards. You don’t have to be a security expert to understand the benefits of our all-in-one security platform. See how well Havoc Shield works with your current accounting software and systems by setting up a demo.