Conflict of interest and confidentiality

Two kinds of conflict

A conflict of interest exists when a duty you owe to someone — a client, an employer, the public — could be influenced by a personal interest. The definition has a word in it that first-year learners skip: could. The conflict exists at the moment the interest and the duty point in different directions, not at the moment you act on it. That gives two kinds:

• An actual conflict: the personal interest is real and present — you are evaluating a supplier your brother owns.
• A perceived conflict: a reasonable outsider, knowing the facts, would doubt that your judgement is independent — whether or not it is.

The perceived kind is the one professionals underestimate, because from the inside you know your judgement is fine. The outsider does not know that, and the profession's value rests on what the outsider can rely on. So the rule of practice is: a conflict is disclosed, not self-assessed. You tell the person who owns the decision — a manager, a partner, a client — and they decide whether you continue. The CPA Ontario Code carries this in a rule on conflicts of interest (rule 210; the number is public, the text is the Code's and is not reproduced here).

Worked example — the Leafs tickets

The running case this course carries from module 4 is Lakeshore Print Co., a Burlington printer whose owner has asked your firm, Wren Advisory, what to do about an ageing press. One alternative is a new press from a vendor whose sales rep, Marcus Doyle, phones you mid-evaluation: two Leafs tickets "to say thanks for considering us", and, in the same call, "what did the lease people quote?"

Suppose you decline both the tickets and the question. Is there anything left to do? Yes — and this is the point of the example. The offer is now a fact about the evaluation: a vendor under consideration tried to give the analyst something of value. If it comes out later that the analyst had been offered tickets and had said nothing, a reasonable outsider — the owner, the bank, the other vendors — would doubt the recommendation, however clean it was. Declining removes the actual conflict. Only disclosure removes the perceived one. So the action is: decline, and record the offer to your manager in writing, with the date, the item and what was said — and keep Marcus's press in the evaluation on its merits, because excluding it to look clean would be its own distortion.

Three thresholds people reach for, and why none of them works: under $100 is fine (the value affects how tempting it is, not whether the outsider would doubt you); I refused, so it's fine (refusal fixes the actual conflict only); it only matters if it changes my recommendation (that is the one thing the outsider can never verify).

The temporary insider

The second duty is confidentiality: information you hold because of an engagement is used for that engagement and nothing else. The Code carries it as rule 208. Two features of it surprise students.

First, it reaches beyond you. A co-op student at a firm learns that a public client's quarter is far better than the market expects, and mentions it to a roommate, who buys shares. Under the Ontario Securities Act (s. 76, read at time of writing, 2026), a person "in a special relationship with an issuer" includes anyone doing professional work for it — the student, a temporary insider who holds material non-public information for the length of the engagement — and anyone who learns the fact from such a person. The roommate is liable for trading; the student is liable for tipping, without having traded a share. "It was a casual conversation" is not a defence in either direction.

Second, it does not end. Confidentiality survives the engagement: a former client's information is as protected the year after the file closes as the week it was open, and the duty applies to every kind of engagement, not only audits.

Classify four situations

1. Your firm is asked to advise a company; your cousin is its CFO. (Actual conflict — disclose before starting.)
2. You once worked a summer at a supplier your client is now evaluating. (Perceived conflict — disclose; the manager decides.)
3. A friend asks how a former client "is doing these days"; you left the file two years ago. (Confidentiality — the duty has not expired.)
4. You overhear a partner's call about a client's pending acquisition and mention it at a dinner. (Confidentiality and tipping — a breach, and potentially s. 76.)