Compliance Glossary
Definition

Risk Assessment

A systematic process of identifying threats to your firm's data and evaluating the effectiveness of your security controls.

What It Means

A risk assessment in the context of CPA firm compliance is a structured evaluation of threats and vulnerabilities to the confidentiality, integrity, and availability of client data. It involves identifying what data you hold, where it is stored, what threats exist (both internal and external), what controls are in place, and where gaps remain. The FTC Safeguards Rule requires risk assessments to be documented in writing and to cover seven specific areas: access controls, data inventory, encryption, secure development, authentication, disposal procedures, and change management.

Why It Matters for CPA Firms

Risk assessments are the foundation of your entire compliance program, and they drive your WISP, your incident response plan, and your control testing strategy. The FTC Safeguards Rule specifically requires periodic risk assessments, and the results must be documented. Without a current risk assessment, your WISP and other policies are effectively built on guesswork. Regulators and insurers expect to see documented risk assessments as evidence that you understand your firm's threat landscape.

Relevant Regulations

  • FTC Safeguards Rule (16 CFR 314.4(b))
  • IRS Publication 4557
  • NIST Cybersecurity Framework

How Kompflow Helps

The 7-Module Risk Assessment module handles this for your firm, personalized to your software, team size, and state requirements.

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