This audit examined a case of potential conflict of interest in the School of Pharmacy at the State University of New York (SUNY) at Buffalo. In 1992 a professor in the Department of Pharmacy Practice, which conducts grant-funded drug research, created Pharmaceutical Outcomes Research, Incorporated (PhOR), a private, for-profit corporation that also conducted drug research. In February 1994 this professor became chairman of the department. It was alleged that a computer network had been removed from the department to PhOR offices where it was used to obtain research monies that may have otherwise gone to the university, and that department faculty and staff time had been inappropriately diverted to benefit PhOR. An investigation found that the professor in question admitted to removing the computer network to PhOR offices and using the equipment to work on both university and PhOR grants. It was also found that drug research grant funding for the department declined from $428,000 to virtually nothing during the period while grant funding for PhOR increased substantially. The professor subsequently resigned, and the matter was referred to the state attorney general's office. Two appendixes contain a list of contributors and SUNY Buffalo's response to the report. (MDM)