Breach not to blame for TurboTax fraud: Intuit CEO

Smaller than expected loss for TurboTax maker Intuit
Smaller than expected loss for TurboTax maker Intuit   

A spike in fraudulent state tax filings through TurboTax was not due to a breach at software maker Intuit, CEO Brad Smith told CNBC on Friday.

"Our systems have not been breached at Intuit," Smith said during a "Squawk Alley" interview. "We take privacy and security of our customers' information as job one. We also apply the most advanced technologies and techniques to protect our customers."

Intuit disclosed earlier this month that it was working with a number of state agencies to address the increase in fraudulent state tax returns filed through its TurboTax software.

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Days after the announcement, The Wall Street Journal reported the FBI had opened an investigation to determine whether TurboTax customers' personal information had been stolen due to a breach of Intuit's system.

After consulting with cybersecurity firm Palantir, Intuit said the information had been obtained by other means.

The company briefly suspended transmission of electronically filed tax returns on Feb. 5. Minnesota's Department of Revenue temporarily stopped accepting TurboTax filings, citing concerns over potential fraud.

On Thursday, Intuit reported a smaller-than-expected quarterly loss. The company's net loss widened to $66 million, or 23 cents per share, for the second quarter ended Jan. 31, from $37 million, or 13 cents per share, a year earlier.

On an adjusted basis, the company reported a loss of 6 cents per share, way below the 13 cents analysts had expected, according to Thomson Reuters.

Shares of Intuit hit an all-time high after the report and were up more than 5 percent Friday afternoon.

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Intuit saw a 7-percent year-over-year decline in its desktop TurboTax software business, equal to a loss of about 270,000 customers. It attributed half of that setback to displeasure with a change in policy that forced some customers to buy a more expensive version of the software.

The company responded by issuing refunds to customers affected by the change. While that only amounted to about 3 percent of its base, those were important, loyal customers, Smith said.

"Good companies can make mistakes," he said. "In the case of the product lineup change we made to the TurboTax desktop product, we thought what would work for online customers would work for our desktop customers this year, and we were wrong."

Reuters contributed to this story.