At a glance
As told to Susan Muldowney
Question: “I provide tax and advisory services to two competing companies in the transport and logistics industry. I recently learned that the companies are planning to merge and I suspect that this may present a conflict of interest. How should I resolve this and how can I determine if the conflict-of-interest threat is at an acceptable level?”
Answer: This situation does present a potential conflict of interest, as you’re likely to want both clients to get the best possible outcomes from the merger – whether it’s the best price or the best deal.
APES 110 Code of Ethics for Professional Accountants sets out the fundamental principles of ethics for professional accountants. These principles establish the standard of behaviour that is expected.
The fundamental principles are:
- integrity
- objectivity
- professional competence and due care
- confidentiality
- professional behaviour.
In the scenario you’ve outlined, the principles of integrity, objectivity and confidentiality may be threatened.
Integrity refers to always conducting professional and business relationships in an honest and straightforward manner.
Objectivity refers to exercising professional judgement without being compromised by influence, bias or a conflict of interest.
Confidentiality refers to respecting the privacy of information acquired as a result of professional relationships.
The best place to start in addressing the conflict-of-interest threat is to make the two parties aware of your potential conflict of interest and the threats that it has created. Some of the decisions that are made about the merger outcome would be dependent upon the tax and advisory services that you have provided.
For example, the valuation of assets or other types of services that might affect their willingness to enter the merger, as well as the price that would be paid.
Some conflicts of interest are impossible to avoid, some can be eliminated and others need to be managed to an acceptable level.
When assessing whether your conflicts of interest are at an acceptable level, ask yourself if you can comply with your ethical requirements and other professional requirements. In supplying tax services, for example, are you going to be providing unbiased evidence that doesn't conflict with relevant tax law? Would it be objective professional advice?
Be sure that you’ve made full disclosure of this to relevant parties, including those with governance roles, ensure that the disclosures have been documented, that you have discussed how your conflicts will be managed to an acceptable level and why you believe that the matter has been addressed sufficiently to mitigate the risk or threats.
You may decide that the conflict of interest cannot be managed, and you can no longer provide professional services to both clients.
You may obtain consent from both clients to continue to perform the professional services – it’s important to document this as well.
Regardless of outcome, you must maintain confidentiality with respect to the affairs of both parties, unless you were given specific permission by those clients to share that information.
