Conflict of interest – part 2

This was your original question:

“My question is how does the conflict of interest arise? I can not understand this. Whose interest is being conflicted? the audit firm? or the audit client?”

The conflict is in the role of Ryder, the audit firm.

Inevitably a tender document will contain details of Crow’s (the audit client providing the tender to Hatfield) activities and proposed charges

In the capacity as Hatfield’s accountants / auditors Ryder is now in the position of trying to do its best for Hatfield as well as for Crow

There is a major risk of breach of confidentiality (“Crow could afford to charge you less”: “Hatfield can afford more than that”: “Hatfield’s quality control measures over the quality of goods bought is not strong so you could get rid of some of that old stock”: “”You’ll need to check the quality of Crow’s deliveries because they’re having problems with obtaining quality raw materials and there are a lot of goods being returned to Crow by their other customers”: and on it goes …)

With reference to professional matters involved:

clearance letter should be obtained from both companies giving their acceptance that you should help one in its tendering process for the other

separate teams should be engaged in the process

and there should be NO communication between these two teams

all steps involved in preparing the tender by Crow and the processing of the tender by Hatfield should be known only to the members of the respective teams

confidentiality is the big issue and access to data relating to the two entities and their activities should be carefully monitored, restricted and controlled

Is that enough for 5 marks?

OK?