A merger is being finalized between your public practice and a firm that provides book-keeping services. As the partner responsible for quality control, you have not yet finalized your due diligence on the policies and procedures designed to provide reasonable assurance that the firm and its personnel comply with relevant ethical requirements. However, you are confident that the book-keeping firms policies and procedures are robust, even though you have not yet completed a review of them. Nevertheless, you just assume that there are no issues, since the firm being acquired only provides basic book-keeping services.

A few months after the merger is completed, you receive a phone call from one of your clients. Your client is concerned because an employee of your firm who performs book-keeping services for them also has an interest in a business that is one of their major competitors. Your client is particularly worried because they are currently in the middle of extremely confidential business negotiations. The client wants guarantees that your employee will not have access to any confidential information. You agree to follow up and further investigate your clients concerns.

Required:

Identify and describe the quality assurance and ethical issues arising from this scenario.