How to Build a WISP CPA Firms Can Use to Protect Client Data

In an era where cyber threats and data breaches are becoming more frequent, CPA firms must take proactive steps to safeguard sensitive client information. The Federal Trade Commission (FTC) Safeguards Rule mandates that financial institutions, including CPA firms engaged in tax planning and preparation, develop, implement, and maintain a Written Information Security Program (WISP).

A WISP serves as a structured approach to protecting nonpublic personal information (NPI) by establishing administrative, technical, and physical safeguards. A well-implemented WISP helps detect unauthorized access, prevent data breaches, and ensure compliance with federal regulations, such as the Gramm-Leach-Bliley Act (GLBA), FTC Safeguards Rule, and others.

In this article, we'll quickly review the essential components of a WISP that CPA firms can use to enhance their organization’s security posture, mitigate risks, and maintain compliance with evolving FTC Safeguards requirements.

Understanding the FTC Safeguards Rule

Financial institutions are required to develop, implement, manage, and continually improve an Information Security Program (ISP) designed to protect client information under the FTC Safeguards Rule. This applies to CPA firms that engage in financial activities, such as tax planning and preparation services.

The Federal Trade Commission's Safeguards Rule mandates that covered financial institutions implement and maintain safeguards to protect customer information. The Federal Trade Commission (FTC) defines a financial institution as an entity engaged in an activity that is financial in nature or incidental to such financial activities. For CPA firms, this means they must ensure they are safeguarding customer information through a comprehensive written information security policy (WISP). Learn more about who qualifies as a financial institution under the FTC Safeguards Rule here.

The Safeguards Rule specifies that organizations must implement security controls to detect unauthorized access, limit it resources exposure, and secure sensitive customer information effectively. Compliance is not optional, as failure to adhere can lead to penalties and reputational damage. Learn more about the importance of a WISP in this guide.

Building a Reasonable Information Security Program

A reasonable information security program must include administrative, technical, and physical safeguards designed to protect customer information. Whether the position of a Qualified Individual is filled internally or through a service provider, the financial institution must still ensure compliance and maintain oversight over the third-party provider's actions and security practices. The FTC Safeguards Rule requires firms to tailor these safeguards to the organization’s security posture, size, and complexity.

Key components include:

• Access controls – Implement multi-factor authentication to limit unauthorized users.

• Encryption protocols – Encrypt customer information during storage and transmission.

• Written incident response plan – Develop an incident response strategy to address security incidents.

• Regular vulnerability assessments – Identify and mitigate security risks.

To establish an effective ISP, CPA firms should follow the steps outlined in this article.

Identifying and Assessing Risks

Risk assessment is a crucial step in evaluating an organization’s security posture and ensuring that appropriate safeguards are in place. CPA firms must periodically review access controls and conduct vulnerability assessments to detect unauthorized access before it escalates into a data breach.

The risk assessment process should include:

• Identifying sensitive data, such as nonpublic personal information.

• Evaluating security incidents and potential threats.

• Implementing procedures to strengthen physical safeguards and security policy compliance.

• Addressing foreseeable emerging threats in IT infrastructure.

Learn more about common CPA firm security risks and how to address them in this article.

Implementing Safeguards and Controls

A Written Information Security Program (WISP) serves as the foundation for a CPA firm’s data protection strategy, ensuring compliance with the FTC Safeguards Rule and industry best practices. To be effective, the WISP must clearly document security safeguards and controls, outlining the policies, procedures, and technical measures implemented to protect customer information from unauthorized access, data breaches, and cyber threats.

Below are some of the key security controls that must be addressed within the WISP to demonstrate a structured and compliant approach to safeguarding sensitive data:

1. Firewalls and Intrusion Detection Systems

The WISP should define the firm’s network security measures, specifying the use of firewalls and intrusion detection/prevention systems (IDS/IPS) to monitor and block unauthorized access attempts. It should outline:

• Firewall configuration standards (e.g., default-deny policies, port restrictions, regular updates).

• Intrusion monitoring procedures, including alert management and incident response integration.

• Regular vulnerability assessments to ensure security measures remain effective against emerging threats.

2. Access Controls and Authentication Mechanisms

The policy should document role-based access control (RBAC) and multi-factor authentication (MFA) requirements, ensuring that only authorized individuals can access sensitive customer data. Key elements to include:

• User access provisioning and deprovisioning policies, defining approval processes and regular reviews.

• Authentication requirements, such as MFA enforcement for remote access, privileged accounts, and critical systems.

• Least privilege and need-to-know principles, restricting access based on job function.

3. Incident Response and Breach Notification Procedures

A comprehensive Incident Response Plan (IRP) should be included in the WISP, detailing how security incidents are handled, reported, and remediated. This section should outline:

• Roles and responsibilities of response team members.

• Escalation procedures and communication protocols.

• Incident containment and forensic analysis steps.

• Regulatory breach notification obligations and client communication policies.

4. Continuous Monitoring and Risk Assessments

To proactively detect security threats, the WISP must establish guidelines for continuous system monitoring, anomaly detection, and periodic risk assessments. Key documentation points:

• Log retention and review policies for monitoring access attempts and security events.

• Automated alerting and security analytics tools to detect potential breaches.

• Annual risk assessments evaluating control effectiveness and emerging threats.

5. Encryption and Data Protection Policies

The WISP must detail encryption standards to ensure customer data remains protected at rest and in transit. This section should specify:

• Encryption algorithms and key management practices aligned with industry standards.

• Secure data storage requirements, including database encryption and secure backup protocols.

• Data transmission security measures, such as TLS encryption for emails and web communications.

Building an Effective and Compliant WISP

A well-structured WISP is not just a compliance requirement—it is a living document that should be reviewed and updated regularly to reflect evolving threats, regulatory changes, and operational improvements. By documenting security safeguards in a clear and actionable manner, CPA firms can ensure regulatory compliance, enhance their security posture, and protect their clients' sensitive data.

A detailed guide on structuring and maintaining an effective WISP is available in this guide.

Documenting Compliance Strategies in Your Written Information Security Program (WISP)

Maintaining compliance with the FTC Safeguards Rule requires a structured approach, ensuring that security policies, roles, and responsibilities are well-documented. A Written Information Security Program (WISP) must outline the firm's compliance strategies, demonstrating how security measures are implemented, maintained, and continuously evaluated.

1. Designation of a Qualified Individual

The WISP should define the process for appointing a compliance officer responsible for overseeing security policies and regulatory adherence. Documentation should include:

• Role and responsibilities of the Qualified Individual.

• Required expertise in cybersecurity and regulatory compliance.

• Oversight and reporting requirements, ensuring continuous evaluation of security controls.

2. Access Control and Business Need Justification

A clear role-based access control (RBAC) policy must be established within the WISP to ensure that only authorized personnel handle sensitive customer information. Key documentation includes:

• Criteria for determining access needs based on job roles.

• Processes for granting, reviewing, and revoking access.

• Security controls to prevent unauthorized data exposure.

3. Data Encryption and Protection Procedures

The WISP should outline data encryption policies to protect sensitive financial records, ensuring compliance with security best practices. Required documentation includes:

• Encryption standards and protocols for data at rest and in transit.

• Multi-factor authentication (MFA) requirements for accessing encrypted data.

• Secure key management procedures to prevent unauthorized decryption.

4. Data Flow Mapping and Risk Assessments

A comprehensive data flow analysis must be documented within the WISP to identify where safeguards are required. This section should:

• Map the movement of customer data within the organization.

• Identify potential vulnerabilities in data storage, transmission, and processing.

• Define required safeguards such as firewalls, access controls, and continuous monitoring.

5. Regular Audits and Employee Training

The WISP should include policies for ongoing audits and employee training, ensuring continuous improvement of security practices. Documentation should cover:

• Frequency and scope of internal security audits.

• Processes for identifying and addressing compliance gaps.

• Mandatory employee training programs on security best practices and incident response procedures.

Maintaining an Effective WISP

A well-documented WISP serves as a living framework for compliance, helping CPA firms demonstrate regulatory adherence, mitigate risks, and protect client data. Regular reviews and updates are essential to adapt to evolving threats and regulatory changes.

Learn more about FTC Safeguards compliance strategies here:

• CPA WISP: Written Information Security Plan for FTC Safeguards Rule Compliance

• FTC Safeguards Rule Requirements: What Every Organization Needs to Know

Documenting Breach Notification Requirements in Your Written Information Security Program (WISP)

Your Written Information Security Program (WISP) must include clear breach notification procedures to ensure compliance with the FTC Safeguards Rule and the Gramm-Leach-Bliley Act (GLBA). These policies should outline reporting requirements, consumer notifications, and post-incident response measures to mitigate damage and prevent future breaches.

1. Reporting Unauthorized Data Acquisition

The WISP must document the firm’s obligation to report any unauthorized acquisition of unencrypted consumer information affecting 500 or more individuals within 30 days. Required documentation includes:

• Use of the FTC’s online reporting form for breach disclosure.

• Internal reporting procedures, ensuring senior leadership and compliance officers are notified.

• Regulatory record-keeping to track breach incidents and responses.

2. Consumer Notification Policies

CPA firms must establish consumer notification procedures to inform affected individuals of a breach and provide recommended safeguards. The WISP should outline:

• Timelines and methods for notifying impacted consumers.

• Required content in notifications, including details of the breach and protective actions consumers should take.

• Consumer support resources, such as fraud monitoring and identity theft prevention services.

3. Post-Breach Risk Assessment and Security Enhancements

Following a breach, firms must evaluate security weaknesses and implement corrective measures. The WISP should document:

• Data disposal procedures identify how firms will comply with Gramm-Leach-Bliley Act regulations to dispose of customer information securely to minimize exposure.

• Security control adjustment procedures, such as enhanced encryption, stricter access controls, and multi-factor authentication (MFA).

• Follow-up risk assessments to identify vulnerabilities and ensure remediation efforts are effective.

4. Incident Response Plan Updates

A breach should trigger a review and update of the firm’s incident response plan. The WISP must include policies for:

• Regularly testing and refining incident response procedures.

• Updating roles and responsibilities to improve breach detection and response.

• Integrating lessons learned from past incidents into security strategies.

5. Secure Disposal of Customer Information

To minimize exposure, the WISP should establish secure data disposal policies aligned with GLBA regulations, ensuring:

• Proper destruction of outdated customer records to prevent unauthorized recovery.

• Compliance with secure disposal standards, including shredding, wiping, or degaussing sensitive data.

Maintaining Compliance and Readiness

By documenting and enforcing breach notification policies, CPA firms can demonstrate regulatory compliance, minimize legal exposure, and enhance consumer trust. Regular WISP updates and incident response drills ensure firms remain prepared for emerging threats.

A detailed guide on breach response and compliance best practices is available here:

• Crafting a Solid Security Incident Response Policy: A Step-by-Step Guide

Maintaining Compliance and Staying Up-to-Date

Maintaining compliance requires continuous monitoring and adapting to emerging threats. The landscape of cybersecurity is constantly evolving, and organizations must take proactive steps to ensure they meet regulatory requirements and protect customer information effectively. Organizations should:

• Periodically review access controls to adjust security measures, ensuring that only authorized users can access sensitive customer information. Regular audits help detect unauthorized access and mitigate security risks before they become major concerns.

• Update security policies as cyber threats evolve, incorporating lessons learned from past security incidents and industry best practices. This includes reviewing incident response plans and making necessary adjustments to improve their effectiveness.

• Train employees on incident response procedures to ensure they can detect, report, and respond to security incidents efficiently. A well-informed workforce is a crucial line of defense in safeguarding customer information and mitigating the impact of potential data breaches.

• Conduct regular vulnerability assessments to identify weaknesses in the organization's security posture and implement necessary safeguards. Proactively addressing vulnerabilities reduces the risk of exploitation by cybercriminals.

• Implement multi-factor authentication (MFA) to add an extra layer of security when accessing customer information and critical systems. This measure significantly reduces the likelihood of unauthorized access.

• Partner with industry experts and service providers to stay informed about evolving threats and best practices. Engaging with cybersecurity professionals ensures organizations receive concrete guidance on compliance strategies and security enhancements.

• Monitor changes to regulations, including updates to the FTC Safeguards Rule and other applicable laws such as the Gramm-Leach-Bliley Act. Staying ahead of regulatory changes helps organizations adapt their policies and procedures accordingly.

By implementing these strategies, CPA firms can enhance security while maintaining customer information integrity. A proactive approach to compliance not only helps meet legal obligations but also builds trust with clients and strengthens overall business resilience.

How Input Output Supports FTC Safeguards Rule Compliance

At Input Output, we help CPA firms navigate FTC Safeguards Rule compliance with tailored security solutions.

Our offerings include:

• Customized WISP – A written information security policy tailored to your firm.

• Compliance Workbooks and Checklists – Streamline compliance efforts.

• Security Tools – Support multi-factor authentication, encryption, and unauthorized access detection.

• Incident Response Planning – Ensure readiness for security incidents.

Our solutions reduce compliance complexity while strengthening customer information security. Learn more about our FTC Safeguards WISP here.

Conclusion

Developing a WISP CPA firms can rely on is essential for meeting FTC Safeguards Rule requirements and protecting sensitive customer information. By implementing security controls, conducting risk assessments, and maintaining an effective incident response plan, firms can ensure customer information security while staying compliant with federal regulations.

A proactive approach to compliance not only helps meet legal obligations but also builds trust with clients and strengthens overall business resilience.