Conflicts of Interest
Meaning and definition of conflicts of interest
A conflict of interest is believed to occur when an organization or an individual is caught up in multiple interests, one of which could probably distort the motivation for one act in the other. Moreover, a conflict of interest can exist only if an individual or testimony is delegated with some impartiality; a small amount of trust is required to create it. The existence of a conflict of interest is independent from the implementation of impropriety. Thus, a conflict of interest can be revealed and willingly defused before any vice exists.
Ways to reduce conflicts of interest
There are certain methods which can help in mitigating the conflicts of interests include:
- Third party evaluations
- Codes of ethics
Types of conflicts of interest
The most common forms of conflicts of interest include:
- Self dealing, which involves an official, who reins an organization, lead it to enter into a transaction with the official, or with another organization benefitting the official. The official is on each side of the “deal.”
- Outside employment, wherein the interests of one job gainsay another.
- Family interest, wherein a spouse, child, or any other close relative is employed (or applies for employment) or where goods or services are bought from such a relative or a firm controlled by a relative. Due to this reason, various employment applications inquire if one is related to a current employee. If this is the situation, the relative could then rescue from any kind of hiring decisions. Violence of this type of conflict of interest is referred as nepotism.
- Gifts from friends who are involved in business with the person receiving the gifts. (These types of gifts may include non-tangible things of value like lodging and transportation).
- Pump and dump, wherein a stock broker holding a security inflates the price artificially by “upgrading” it or thinning out rumors, sells it out, and adds short position, then “downgrades” the security or thins out the security or negative rumors to bring the price down.
- Debt ratios
- Liquidity ratios
- Profitability ratios
- Asset management ratios
- Cash Flow Indicator Ratios
- Market value ratios
- Financial analysis
- Business Terms
- Financial education
- International Financial Reporting Standards (EU)
- IFRS Interpretations (EU)
- Financial software