According to the 2021 Data Breach Investigations Report by Verizon, 86% of data breaches were financially motivated, and 61% of breaches involved credential data. The average cost of a data breach for an accounting firm is $2.2 million, according to a report by IBM.
As the digital landscape continues to evolve, accounting firms are increasingly relying on technology to streamline their operations and enhance their services. While this shift has undoubtedly brought numerous benefits, it has also exposed firms to a new set of risks, particularly in the realm of cybersecurity.
With sensitive client data at stake, it is crucial for accounting firms to prioritize cybersecurity and implement best practices to protect their clients' information. In this article, we will explore some of the most effective cybersecurity measures that accounting firms are adopting to safeguard their clients' data.
#1 Develop a Comprehensive Cybersecurity Policy
The first step in protecting sensitive client data is to develop a comprehensive cybersecurity policy that outlines the firm's approach to managing and mitigating cyber risks. This policy should cover various aspects, including:
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Employee training
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Access controls
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Data encryption
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Incident response plans.
By establishing a clear and well-defined policy, accounting firms can ensure that all employees understand their roles and responsibilities in maintaining the firm's cybersecurity posture. It’s essential this policy is not only written down but transparent and correctly communicated to the entire firm. Let’s take a look at every point your policy needs to cover.
Train Employees on Cybersecurity Awareness
Employees are often the weakest link in an organization's cybersecurity defenses. It only takes to open the wrong email or download a document from a known sender already infected. In 2019, a major accounting software provider, Wolters Kluwer, experienced a ransomware attack that disrupted its services. The attack impacted accounting firms and their clients, who were unable to access critical tax and accounting software for several days.
To minimize the risk of human error, accounting firms should invest in regular cybersecurity awareness training for all employees. This training has to cover topics such as:
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Recognizing phishing emails
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Creating strong passwords
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Following proper procedures for handling sensitive client data.
Implement Access Controls
Restricting access to sensitive client data is a critical component of any cybersecurity strategy as it limits the number of employees who can access client data and ensure that only those with a legitimate need can do so. This can be achieved through role-based access control (RBAC) systems, which grant permissions based on an employee's job function. Regular reviews and updates on access permissions are essential to ensure that they remain appropriate as employees' roles change.
Use Multi-Factor Authentication (MFA)
Multi-factor authentication (MFA) is a security measure that requires users to provide two or more forms of identification before accessing sensitive data. For example, employees may be required to provide a password and a fingerprint scan or a password and a code sent to their phone.
MFA can significantly reduce the risk of unauthorized access to client data, even if an attacker manages to obtain an employee's login credentials. Your firm can even implement various methods, such as hardware tokens, mobile apps, or biometric authentication.
Encrypt Sensitive Data
Accounting firms often deal with sensitive client data, such as financial records, personal identification information, and other confidential information. A VPN, or Virtual Private Network, can help protect this data by creating an encrypted tunnel that secures data in transit between the accounting firm and the client. This means that even if a hacker intercepts the data, they will not be able to read it.
VPNs can also help prevent unauthorized access to the accounting firm's network and client data. By requiring users to authenticate themselves before accessing the network, a VPN ensures that only authorized users are allowed to access the firm's systems and data.
Keep Your Software Updated
Outdated software is an open door to vulnerabilities that cybercriminals can exploit and access sensitive data. The key is to implement a robust patch management process that ensures all software, including operating systems, applications, and firmware, is regularly updated with the latest security releases. This process should also include regular vulnerability assessments to identify and address potential security weaknesses in the firm's systems.
2# Prepare for the Event of a Cyber Attack
Accounting firms should also implement a disaster recovery plan to ensure that sensitive client data is protected in the event of a cyberattack or other disaster. The plan should outline the steps that the firm will take to recover from a data breach and restore access to client data.
What is Your Secure Backup Strategy?
In the event of a cyber-attack or data loss, having a secure backup of client data including regular backups of all critical data, both on-site and off-site can be invaluable. These backups should be encrypted and tested regularly to ensure that they can be successfully restored in the event of an emergency.
Develop an Incident Response Plan
Despite the best efforts to prevent cyber attacks, it is essential to be prepared for the possibility of a breach. Accounting firms should develop a detailed incident response plan that outlines the steps to be taken in the event of a cybersecurity incident. This plan should include procedures for identifying and containing the breach, assessing the damage, notifying affected clients, and recovering from the incident. By having a well-defined incident response plan in place, accounting firms can minimize the impact of a cyber attack and quickly restore normal operations.
The Future of Cybersecurity For Accounting Firms
As technology advances and cybercriminals become more sophisticated, accounting firms will need to adopt new measures to stay ahead of the curve. One of these trends is the use of artificial intelligence (AI) and machine learning (ML) to detect and prevent cyber threats. These technologies can help identify anomalies and patterns in data that may indicate a potential attack, and take proactive measures to prevent it.
Another trend is the use of blockchain technology to secure client data. Blockchain provides a decentralized, tamper-proof ledger that can be used to store and share sensitive data securely. This can help prevent data breaches and ensure the integrity of financial records. Stay tuned to our blog as we will develop this topic further in future entries.
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Kevin Mitchell, CPA
Senior Manager and CPA with over 20 years of experience in accounting and financial services, specializing in risk management and regulatory compliance. Skilled in managing audits and leading teams to deliver exceptional services. Proud father of two.
