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Cyber Risks at Accounting Firms
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Accounting
Cyber Risks for Small to Medium-Sized Accounting Businesses: Protecting Your Clients’ Data
Cyber Risks for Small to Medium-Sized Accounting Businesses: Protecting Your Clients’ DataSmall to medium-sized accounting businesses are prime targets for cybercriminals. Why? Because you hold a treasure trove of highly sensitive financial and personal data from your clients. This makes you incredibly attractive to malicious actors looking for financial gain through identity theft, fraud, and other criminal activities.
Despite this significant risk, many SMBs in the accounting sector mistakenly believe they are too small to be targeted, or lack the resources and expertise to implement robust cybersecurity measures. This page will outline the key cyber risks you face, provide insights into the typical costs of a breach, and detail essential steps you should be taking to protect your clients’ invaluable data.
Common Cyber Risks Faced by Accounting Businesses
Cyber threats are constantly evolving, but several common attack vectors consistently target accounting firms:
Phishing Attacks
Phishing remains the #1 method hackers use to compromise business networks. These attacks are increasingly sophisticated and often impersonate trusted entities like HR, executives, or even known vendors. Employees can be tricked into clicking malicious links, downloading infected attachments, or entering credentials into fake login pages, giving attackers direct access to your systems and data.
Ransomware
Ransomware attacks encrypt your critical files and systems, demanding a ransom (usually in cryptocurrency) for the decryption key. Paying the ransom doesn’t guarantee data recovery, and the operational downtime can be devastating. Studies show that over 60% of SMBs hit by ransomware go out of business within six months of the attack.
Outdated Software and Unpatched Vulnerabilities
Running old versions of operating systems, accounting software, browsers, or plugins with known vulnerabilities is like leaving your office door wide open. Cybercriminals actively scan for these weaknesses to gain a foothold in your network.
Weak Password Practices and Lack of Multi-Factor Authentication (MFA)
Compromised credentials are involved in over 80% of hacking-related breaches. Weak, reused, or easily guessed passwords, coupled with a lack of MFA, make it simple for attackers to gain unauthorized access to accounts containing sensitive client data.
Insider Threats (Accidental or Malicious)
Not all threats come from external hackers. Employees, whether intentionally or accidentally, can pose significant risks. Accidental clicks on malicious links, loss of devices with sensitive data, or even disgruntled staff with access to confidential information can lead to severe data breaches.
Recent Breaches Affecting Accounting Firms
Accounting firms, both large and small, are continually targeted. Here are a few examples of recent incidents:
- Wineberg Solheim Howell & Shain, P.C. (2024/2025): This firm detected suspicious activity in November 2024, leading to the discovery that an unauthorized actor accessed and acquired sensitive client information, including names, Social Security numbers, IRS identity protection PINs, driver’s license numbers, and health insurance information. Notifications were sent out in March 2025.
- Wright, Moore, DeHart, Dupuis & Hutchinson (WMDDH) (2023/2024): In July 2023, suspicious network activity was identified at this Louisiana-based firm. It took several months to determine the full extent, but ultimately, over 127,000 individuals had their personal information compromised, including names, Social Security numbers, driver’s license numbers, passport numbers, financial account numbers, and medical information.
- Legacy Professionals LLP (2024/2025): This Illinois firm became aware of suspicious activity in April 2024, which later in November 2024 was confirmed as a data theft. The breach exposed names, Social Security numbers, driver’s license/state ID numbers, and medical treatment/health insurance information for over 216,000 individuals.
- Deloitte (Older, but illustrative): Even large firms are not immune. Deloitte experienced a cybersecurity breach that may have exposed millions of emails, usernames, passwords, IP addresses, business information, and health records. The breach reportedly stemmed from an administrator’s account that lacked two-step verification.
Typical Costs of a Cyber Attack
The financial ramifications of a cyber attack can be catastrophic for small to medium-sized accounting businesses, often leading to closure. The costs extend far beyond just ransom payments:
- Average Breach Cost: While figures vary, the average cost of a data breach for small businesses (fewer than 500 employees) can range from $120,000 to $1.24 million. Some incidents can even reach up to $7 million.
- Downtime and Recovery: Over 50% of SMBs report that it took 24 hours or longer to recover from an attack, with significant operational disruption. This includes lost productivity, inability to serve clients, and potential revenue loss.
- Ransomware Payments: The average ransomware demand can be significant. While not always advised, many small businesses pay the ransom out of desperation.
- Incident Response: Hiring cybersecurity experts for investigation, containment, and recovery can be extremely expensive, often costing $800 to $1000/hour for some vendors, potentially exceeding $100,000 depending on the breach’s extent.
- Reputational Damage: A data breach erodes client trust, leading to client churn and difficulty attracting new business. Over 55% of consumers are less likely to continue doing business with a company that has suffered a breach.
- Regulatory Fines and Legal Fees: Accounting firms handle highly regulated data. Non-compliance with regulations like the FTC Safeguards Rule, HIPAA (if health information is handled), or state-specific privacy laws can result in substantial fines and legal action from affected clients. For example, HIPAA violations can range from $137 to $68,928 per violation, with annual limits.
- Credit Monitoring and Notification Costs: Firms are often legally obligated to provide credit monitoring services to affected individuals and cover the costs of breach notification.
Things Accounting Businesses Should Be Doing to Protect Client Data
Proactive cybersecurity is no longer optional; it’s essential for the survival and reputation of your accounting firm. Here are critical steps you should be taking:
1. Implement Strong Password Protocols and Multi-Factor Authentication (MFA)
- Require long, complex passwords (at least 12 characters, with a mix of letters, numbers, and symbols).
- Utilize a reputable password manager for secure storage and generation of unique passwords for every account.
- Enable MFA on ALL accounts wherever possible, especially for email, cloud services, and client portals. This adds a crucial second layer of security even if a password is compromised.
- Never reuse passwords between personal and work accounts.
2. Regular Software Updates and Patch Management
- Keep all operating systems (Windows, Mac), accounting software (QuickBooks, Xero, etc.), antivirus programs, firewalls, browsers, and plugins consistently updated.
- Enable automatic updates where feasible to ensure security patches are applied promptly.
3. Invest in Robust Cybersecurity Software
- Don’t rely solely on generic antivirus. Invest in business-grade antivirus and endpoint detection and response (EDR) solutions.
- Implement strong firewall tools to block unauthorized network access.
- Consider specialized cloud security solutions designed for accounting firms that offer real-time threat detection and encryption.
4. Encrypt All Client Data
- Encrypt sensitive client data both “at rest” (when stored on devices, servers, or cloud storage) and “in transit” (when being sent via email or client portals).
- Utilize secure, encrypted client portals for all file sharing and communication with clients instead of traditional email for sensitive documents.
- Ensure your cloud storage providers offer robust encryption as a standard.
5. Regular Data Backups and Disaster Recovery Plan
- Implement daily, automated backups of all critical client data to secure, offsite locations (e.g., cloud backups).
- Ensure backups are isolated from your primary network to protect against ransomware.
- Regularly test your data recovery processes to ensure they are reliable and functioning correctly in case of a breach or system failure.
6. Employee Training and Awareness
- Provide regular, mandatory cybersecurity training for all employees, from onboarding onward.
- Train staff to recognize and report phishing attempts, social engineering tactics, and other suspicious activities.
- Emphasize the importance of data privacy and the potential consequences of human error.
7. Implement Least Privilege and Access Controls
- Grant employees access only to the data and systems absolutely necessary for their job roles. This limits the potential damage if an account is compromised.
- Regularly review and revoke access for former employees immediately upon their departure.
8. Develop a Written Information Security Plan (WISP) and Incident Response Plan
- Create a comprehensive WISP outlining your firm’s policies for protecting client data, managing risks, and assigning responsibilities. This is often a regulatory requirement (e.g., FTC Safeguards Rule).
- Develop a detailed incident response plan that outlines the steps to take immediately following a suspected or confirmed data breach. This includes containment, eradication, recovery, and post-incident analysis. Regularly drill and test this plan.
9. Secure Your Network and Devices
- Use robust firewalls and intrusion detection systems.
- Avoid public Wi-Fi for business activities or use a Virtual Private Network (VPN) if it’s unavoidable.
- Ensure all devices used for business (laptops, mobile phones) are adequately secured, encrypted, and have security software installed.
- Segregate work usage from personal usage on computers.
10. Vet Third-Party Vendors
- If you use third-party software or services that handle client data (e.g., payroll providers, cloud accounting platforms), ensure they have robust security protocols and are compliant with relevant data protection regulations.
- Include cybersecurity requirements in your vendor contracts.
The landscape of cyber threats is constantly shifting. Staying informed and continuously adapting your security measures is paramount. Consider consulting with cybersecurity professionals who specialize in protecting small and medium-sized businesses to help assess your risks and implement the necessary defenses.
