Though confident they can spot and handle a conflict of interest, most CPAs struggle with actually defining the term, according to Aon Insurance Services.
Typical examples of CPAs becoming ensnared in conflicts of interest can involve tax and financial planning advice for a married couple who later divorce, trustee services for a family for some members of which the CPA also does tax services, investment recommendations to high-net-worth clients that involve a business for which the firm also does consulting and tax planning, and, prep services to partnerships and to individuals within the partnership.
Aon recommended that all firm personnel be able and ready to identify relationships and situations that could be viewed by others as presenting a conflict, and should be trained on the subject. Staff professionals should be instructed to immediately bring potential conflict situations to the attention of firm management.
To identify possible conflicts, inquire about the prospective client's major business relationships, such as key clients, lenders and vendors, Aon advised, and determine the intended use and distribution of your proposed work product. If there will be third-party users, identify known users, and determine if your firm has professional relationships with the users that present an actual or potential conflict.
In addition, all firms should maintain a continuously updated database of client information. Minimum contents should include the name of the client and affiliated entities; the type of client (individual, public/private company, not-for profit, etc.) and SIC code; names of owners, senior officers and directors, including contact numbers and e-mail addresses; principal banking and investment banking relationships; names of legal counsel and other key advisors and consultants; major customers and vendors; and the name/office of the current engagement partner and services provided.
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