Instructions attached“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
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?
Here is what I am looking for in the case work.
You identified most of the key ethical, legal and accounting issues imbedded in the
fact pattern. Your issues are fully developed. You number each issue that you spot and
make the statement of issue clear and concise.
Your formatting is good for the assignment as you put forth a very organized
response with good use of headings and subheadings.
Your paper comported with APA rules.
You used the IRAC Method. (Issue, Rule, Application, Conclusion)
Your research was relevant and extensive (Outside references from GAAP and
AICPA Code of Conduct o support assertions)

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