Final answer:
A situation in which a CPA performs work for two separate clients who are involved in a legal dispute is an example of a conflict of interest, which can compromise their ability to make objective and unbiased decisions.
Step-by-step explanation:
A situation in which a CPA performs work for two separate clients who are involved in a legal dispute is an example of a conflict of interest. A conflict of interest occurs when an individual or organization has competing interests or loyalties, which can compromise their ability to make objective and unbiased decisions.
In this scenario, the CPA may have a financial interest or personal relationship with one or both clients that could influence their work or objectivity. This conflict of interest could undermine the integrity and impartiality of the CPA's work and create a potential ethical and legal dilemma.
For example, the CPA may be hesitant to disclose damaging information about one client to the other client, or may be more inclined to favor one client over the other in order to maintain their business relationship. This situation highlights the importance of professional ethics and the need for CPAs to maintain independence and objectivity in their work.