Can a law firm employ an accountant to provide accounting services to the firm and to its clients?

Plain-English summary

The Committee was asked whether a law firm, regardless of business form, may ethically employ an accountant to perform services for the firm and its clients, including preparing tax returns, performing audits, setting up bookkeeping, preparing payroll, providing management advisory services, and assisting on insolvency and business matters. The opinion concluded that a firm may employ an accountant to advise and assist its attorneys in performing legal services and to provide accounting services relating to or arising from the firm's legal work, but may not employ the accountant to perform business or personal audits that will be certified or disclosed to anyone other than the client.

The opinion grounded the permissible arrangement in EC 3-6, which allows a lawyer to delegate tasks to lay persons if the lawyer maintains a direct relationship with the client, supervises the delegated work, and has complete professional responsibility for the work product (citing ABA Opinion 316, which permits employing non-lawyers for any task except practicing law). It required that the accountant be compensated by salary and not be a partner, to avoid the fee-splitting prohibitions of DR 3-102 and DR 3-103, and that the firm's letterhead, office sign, and professional cards not indicate the availability of accounting services to clients. Drawing on ABA Opinion 328, it noted that where a second occupation is so law-related that it inseparably involves the practice of law, the lawyer is held to bar standards while conducting it.

On certified audits, the opinion relied on ABA Opinion 272, which (under the former Canons) barred a firm from furnishing a client a CPA-certified statement for public use without disclosing the CPA's employment, and treated such arrangements as too close to be insulated by artificial leave-of-absence devices. The opinion observed that Canon 35's direct-relationship requirement had been superseded by EC 3-6 and Canon 27's advertising bar by DR 2-102(E), and concluded that preparation of certified audits by a firm's accountant-employee for the client's use would not be ethically proper. It noted it did not address the legality of the employment arrangement or questions specific to the professional-corporation form.

Currency note

This opinion was issued in 1979, before the Alaska Bar Association's adoption of the Alaska Rules of Professional Conduct (it applies the former Code of Professional Responsibility) and before the 2009 revisions to those rules. The rules on fee sharing with nonlawyers, supervising nonlawyer assistants, and law-firm advertising have since been recodified. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule mentioned here.

Common questions

Q: Can a law firm hire an accountant to work on client matters?

A: The opinion concluded a firm may employ a salaried accountant to assist its attorneys and provide accounting services arising from the firm's legal work, so long as a lawyer keeps a direct client relationship, supervises the work, and is professionally responsible for it.

Q: Can the firm's accountant issue certified audits to clients?

A: No. The opinion concluded a firm may not employ an accountant to perform business or personal audits that are certified or disclosed to anyone other than the client.

Q: Can the accountant be a partner or share in fees?

A: No. The opinion concluded the accountant must be compensated by salary and not be a partner, to avoid the fee-splitting prohibitions of DR 3-102 and DR 3-103.

Q: Can the firm advertise that it offers accounting services?

A: No. The opinion concluded the firm's letterhead, office sign, and professional cards may not indicate the availability of accounting services to clients.

Background and rules framework

The opinion applied the former Code's prohibitions on fee splitting with nonlawyers (DR 3-102, DR 3-103), the delegation principle (EC 3-6), and the letterhead/advertising rule (DR 2-102(E)), subjects now treated by Model Rules 5.4 (professional independence; fee sharing), 5.3 (nonlawyer assistance), and 7.2 (advertising). It relied on ABA Opinions 316, 328, and 272.

Citations and references

Rules of Professional Conduct (former Code; cf. Model Rules):

• DR 3-102, DR 3-103 (no fee sharing with nonlawyers) (cf. Model Rule 5.4)
• EC 3-6 (delegation to lay employees) (cf. Model Rule 5.3)
• DR 2-102(E) (letterhead and advertising) (cf. Model Rule 7.2)

Other opinions cited:

• ABA Opinion 316 (1967): employing non-lawyers; ABA Opinion 328 (1971): law-related second occupations; ABA Opinion 272 (1946): certified audits; Kansas Bar Association Opinion 11 (1957)

See also

• Alaska Ethics Op. 96-1: Billing for Contract Attorney Services
• Alaska Ethics Op. 94-2: Simultaneous Use of Two Firm Names
• Alaska Ethics Op. 2014-3: Cloud Computing and the Practice of Law

Source

• Landing page: https://alaskabar.org/ethics-discipline/ethics-opinions/adopted-ethics-opinions-chronological/
• Original PDF: https://alaskabar.org/wp-content/uploads/79-3.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

Ethics Opinion No. 79-3
Can a Law Firm Ethically Employ an Accountant to Perform Services for
the Firm and for Its Clients?
This Committee has been requested to provide an opinion as to whether
a law firm, regardless of its business form, may ethically employ an accountant
to perform services for the firm and its clients. The specific services addressed
in the inquiry are as follows:
a. Preparation of tax returns and assisting attorneys in the preparation
of tax returns.
b. Performing business and personal audits, establishing bookkeeping
procedures for clients and preparing payroll disbursements for clients.
c. Assisting attorneys in providing management advisory services.
d. Assisting attorneys on matters relating to business insolvency,
bankruptcy, establishing and terminating businesses.
e. Compensation planning and contract administration.
It is the opinion of this Committee that a law firm may ethically employ
an accountant to advise and assist attorneys in the performance of legal
services and to provide accounting services relating to or arising from legal
services provided by the firm.
It is the opinion of this Committee that a law firm may not employ an
accountant to perform business or personal audits which will be certified or
which will be disclosed or disseminated to any person other than the client.
With regard to such services provided to the client, the attorney shall maintain
a direct relationship with the client, shall supervise the delegated work and
shall be professionally responsible for the work product.
An accountant so employed may not be a partner and shall be
compensated by salary so as to avoid the prohibitions of Disciplinary Rules 3102 and 3-103. Further, the letterhead, office sign and professional cards of
the law firm shall not indicate the availability of the accounting services to
clients of the firm.
Ethical Consideration 3-6 states:

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A lawyer often delegates tasks to clerks, secretaries, and other lay persons. Such
delegation is proper if the lawyer maintains a direct relationship with his client,
supervises the delegated work, and has complete professional responsibility for
the work product. This delegation enables a lawyer to render legal services more
economically and efficiently.
With regard to the delegation of duties to lay employees, the American
Bar Association has ruled that:
A lawyer can employ lay secretaries, lay investigators, lay detectives, lay
researchers, accountants, lay scriveners, non-lawyer draftmen or non-lawyer
researchers. In fact, he may employ non-lawyers to do any task for him except
counsel clients about law matters, engage directly in the practice of law, appear in
court or appear in formal proceedings a part of the judicial process, so long as it is
he who takes the work and vouches for it to the client and becomes responsible to
the client.
ABA Opinion 316 (1967).
It is therefore clear that a law firm may employ an accountant to advise
and assist the attorneys of the firm and provide other services relating to the
legal duties assumed by the law firm. Those services could include the
preparation of tax returns which may properly be prepared by attorneys, so
long as the law firm is maintaining a direct relationship with the client,
supervising the preparation of the return and accepting professional
responsibility for the work product.
A somewhat more difficult question is presented with regard to work by
the accountant employee consisting of performance of business or personal
audits, setting up bookkeeping procedures for clients, preparing payroll
disbursements for clients and similar services which, while law-related, would
not properly be the function of an attorney. With regard to this type of
arrangement, at least one Bar Association has held that a lawyer may employ
an accountant on a salary basis to advise the attorney, but may not employ the
accountant to advise his clients. Kansas Bar Association, Opinion 11, October
18, 1957.
Nevertheless, in view of the trend which currently permits an attorney to
engage in other occupations from the same location as the lawyers' law office,
there would not appear to be a valid ethical basis for prohibiting a law firm,
through its non-lawyer personnel, from providing law-related services.
However, obvious difficulties are inherent in the provision of such services, as
was discussed in ABA Opinion 328 (1971) which related to a lawyer practicing
the profession of law and public accounting from one office. With regard to the
ethical standards that would be applied, to the performance of the law-related
work conducted in the second occupation, the opinion provides that:
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If the second occupation is so law-related that the work of the lawyer in such
occupation will involve, inseparably, the practice of law, the lawyer is considered
to be engaged in the practice of law while conducting that occupation.
Accordingly, he is held to the standards of the Bar while conducting that second
occupation from his law offices. With this qualification, the lawyer may carry on
a law-related occupation, such as that of a CPA from the same office.
It would appear, therefore, that accounting services rendered by a law office
employee would be subject to the requirements that the attorney maintain a
direct relationship with the client, supervise the delegated work, and retain
professional responsibility for the work product. That burden may be
significant if the supervising attorney is not qualified to review and evaluate the
accounting service being provided.
The issues related to the preparation of personal or business audits by
an accountant/employee was discussed in ABA Opinion 272 (1946). While that
opinion pre-dates the adoption of the Code of Professional Responsibility, it
appears to have continuing applicability. That opinion states in part as follows:
It is entirely ethical for a firm of lawyers to employ a public accountant (whether
CPA or not) on a salary basis to advise the law firm on matters of accounting and
to assist the firm in connection with accounting problems arising in its law
practice. For a law firm to employ an accountant on the basis of a division of the
fee of the law firm would violate Canon 34, forbidding the division of legal
profits or fees with those who are not lawyers. To permit an accountant to certify
statements under his own name as a CPA for the use of the clients of the law firm
would violate the provisions of Canon 35 requiring the lawyer relationship to the
client to be personal and direct, without the intervention of any lay intermediary.
A law firm could not furnish a certificate of a CPA in its employ to a client for
public use of the client without a disclosure in connection with this certificate that
the CPA was an employee of the law firm. However, we have frequently ruled
that for a law firm to state publicly that it has in its employ a CPA constitutes a
violation of Canon 27. Accordingly, it would seem impossible for the law firm to
furnish the statements specified without violating this Canon.
That opinion further determined that it would not matter whether or not
the law firm participated in the compensation paid for the statement and in
response to an inquiry regarding the possibility of utilizing a leave of absence
or other temporary arrangement so that the law firm could consider the
accountant as rendering the service on its own time, the Committee said:
The relations of the law firm, the accountant, and the clients contemplated by
these questions, are, in our opinion, too close to be insulated by any such artificial
arrangement.
The requirements of Canon 35 requiring the relationship of the attorney
to his client to be direct and personal would appear to have been superceded
by Ethical Consideration 3-6 of the Code of Professional Responsibility and the
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advertising prohibitions of Canon 27 would seem to be currently covered by DR
2-102(E) and related provisions. Therefore, preparation of certified audits by an
accountant/ employee of a law firm for utilization by the client would not be
ethically proper.
It should be noted that this opinion does not address a multitude of
questions related to the legality of the proposed employee practice, nor is it
directed to any ethical criteria that might be of concern to the proposed
accountant/employee. For example, since a professional corporation is
prohibited from rendering more than one type of professional service, a legal
question would exist as to whether a law firm utilizing the professional
corporation form of business could properly render accounting services.
Adopted by the Board of Governors on October 26, 1979.

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