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?Conflicts between clients? interests?

ACCT 635

Many accountants specialize in industries, so the type of conflict described below is not unheard of.

Michael Cervantes is a CPA practicing as a sole practitioner. Until recently, Michael provided a range of accounting services for La Mancha Hardware Co., a hardware store in Seville, MD where Michael also has his practice. After a bidding process, in which Michael submitted a bid, La Mancha chose to switch their accounting work to a different CPA firm. The bid included the usual preparation of year-end journal entries, tax compliance work, as well as due diligence work regarding the planned purchase of Impossible Dream Hardware Co., a small hardware store in the neighboring town of Mambrino, MD. Michael believes he lost the bid based solely on cost, because La Mancha is not a very profitable business because of the competition from Impossible Dream, among others.

Michael Cervantes is also the continuity provider for another local sole practitioner, Aldonza Dulcinea, CPA, which means Michael steps in if Aldonza gets ill or goes on vacation. Two months ago, Aldonza suffered a heart attack and is not expected to resume practice for another two months. As a result, Michael is now acting as CPA for several of Aldonza?s clients.

One of Aldonza?s clients operates a store, Quixote Electronics, Inc., which sells electrical goods. The owner calls to arrange a meeting to discuss a business venture he is considering.

During the meeting, Quixote?s owner reveals that he plans to make an offer for Impossible Dream Hardware Co. He knows there is another bidder for the business, but doesn?t know who it is, or that the other bidder used to be your client.

After the meeting, you feel uneasy. You want to help Quixote Electronics and provide valuable services on behalf of Aldonza, but you realize that you possess confidential information about the plans of La Mancha. You are also aware of La Mancha?s problems and its motivation for wanting to acquire Impossible Dream Hardware Co.

How will you ensure that you do not use the confidential information you know about La Mancha to the advantage of Quixote?

How will you safeguard your reputation and that of your profession?

\"Conflicts between clients' interests\" ACCT 635 Many accountants specialize in industries, so the type of conflict described below is not unheard of. Michael Cervantes is a CPA practicing as a sole practitioner. Until recently, Michael provided a range of accounting services for La Mancha Hardware Co., a hardware store in Seville, MD where Michael also has his practice. After a bidding process, in which Michael submitted a bid, La Mancha chose to switch their accounting work to a different CPA firm. The bid included the usual preparation of year-end journal entries, tax compliance work, as well as due diligence work regarding the planned purchase of Impossible Dream Hardware Co., a small hardware store in the neighboring town of Mambrino, MD. Michael believes he lost the bid based solely on cost, because La Mancha is not a very profitable business because of the competition from Impossible Dream, among others. Michael Cervantes is also the continuity provider for another local sole practitioner, Aldonza Dulcinea, CPA, which means Michael steps in if Aldonza gets ill or goes on vacation. Two months ago, Aldonza suffered a heart attack and is not expected to resume practice for another two months. As a result, Michael is now acting as CPA for several of Aldonza's clients. One of Aldonza's clients operates a store, Quixote Electronics, Inc., which sells electrical goods. The owner calls to arrange a meeting to discuss a business venture he is considering. During the meeting, Quixote's owner reveals that he plans to make an offer for Impossible Dream Hardware Co. He knows there is another bidder for the business, but doesn't know who it is, or that the other bidder used to be your client. After the meeting, you feel uneasy. You want to help Quixote Electronics and provide valuable services on behalf of Aldonza, but you realize that you possess confidential information about the plans of La Mancha. You are also aware of La Mancha's problems and its motivation for wanting to acquire Impossible Dream Hardware Co. How will you ensure that you do not use the confidential information you know about La Mancha to the advantage of Quixote? How will you safeguard your reputation and that of your profession