Professional Ethics in our Personal Life: Conflicts of Interest

Code of Ethics

Code of ethics

Most companies and professional organizations have a Code of Ethics that employees and members must follow. It is important to remember that many of those ethical guidelines we have at work and in our professional lives are also important for us outside of work. When individuals act contrary to a Code of Ethics in their personal lives, people can also get hurt – just as in our professional lives.

Conflict of interests

Most Codes of Ethics require the disclosure of potential conflicts of interests, which arise when a person may be influenced in their decision as a result of an interest that they have that is in conflict with the decision that they need to make for their company. Conflicts of interest are not just at work; they are in our personal life, too, and can involve our friends, neighbors, relatives and people we have never met. Unfortunately, not everyone is motivated by a Code of Ethics in their personal life like they should be in their professional life.

For example, if someone asks me what company they should use to host their website, I have a potential conflict of interest because my brother owns a company that hosts websites. If I were to recommend my brother’s company, the question becomes whether I am recommending it because it a good web hosting company, or because it is my brother, or maybe even because I might receive a commission for every person that I refer.

Disclosure

It is not that conflicts of interest are automatically bad. However, an undisclosed conflict of interest is unethical, and potentially harmful. If I recommend my brother’s company and I do not tell the person that it is my brother’s company that I am recommending, I have potentially caused that person harm because I have not given them all of the information they need to make an informed decision. However, if I tell them that my brother owns the company, then I have not done anything to cause that person harm.

The disclosure of this conflict of interest may even be helpful to my brother. If I have acted and worked in a way that causes this person to respect me, the fact that it is my brother’s company may be the reason that the person chooses my brother’s company. By behaving ethically and professionally, my recommendation means more, and the fact that I am related to the owner of that company is a positive thing for the person who asked.

Ethics in our personal lives

In our personal lives it is also important to disclose conflicts of interest. I live in a state that recently deregulated its electricity market, which means that I am now able to choose which company I want to produce the electricity that I use. Needless to say, I was swamped with phone calls and mail from the different companies that wanted me to choose them. One evening I was talking to my neighbor and asked if he had chosen a company and how happy he was with his choice. He told me which company he had chosen and that he was happy.

Later, after I had made my selection, I found out that if I recommended others to select the company that I had chosen, they would pay me $50 for each person I recommended and signed up. When I read this, it made me wonder about my neighbor – did he make his recommendation because he was happy, or because he was going to get $50 if I selected the same company that he did?

So, when someone gives you a recommendation, (especially when it is a website giving you a recommendation), you should ask yourself if they have a conflict of interest that they are not telling you about. It might just change your mind about what decision you should make in a particular situation.

Brian Hock, CMA, CIA

 

Are you taking the CMA exam in May or June? Join the CMA Crash Course and MCQ Practice Sessions for only $108. 

Learn More: https://www.hockinternational.com/shop/cma-crash-course-and-mcq-practice/

Share on:

Personal Study Plans Now Available in PassMaps for CMA Exams

See a Sample
Personal Study Plan

Click to Enlarge

What is the Personal Study Plan?

The Personal Study Plan is the latest addition to PassMap - HOCK's topic by topic learning system - that will guide you week by week through your studies based on your target exam date. If your exam date changes, the study plan will adapt your study schedule accordingly.

How does the Plan work?

We know that your study schedule changes every week, so your Personal Study Plan:

  • Is based on weeks rather than days.
  • Stays constantly updated based on your progress.
  • Shows you how much time you need to study each week to be ready for your exam date.
  • Automatically adjusts your weekly study time if you fall behind or get ahead.
  • Keeps you on track to pass your exam.

How do I set up my Plan?

The Personal Study Plan is available for CMA Parts 1 and 2. Students with the CMA trial can also set up a full study plan, and it will carry over when purchasing the HOCK CMA Review.

Share on:

Exam Preparation Using Exam Content: Planning

Exam Preparation - Planning

In this post, we look at preparing for an exam using some of the same concepts that you might study while preparing for the CMA (Certified Management Accountant) or CIA (Certified Internal Auditor) Exam.

Planning

Planning is a topic covered in many professional exams because of how important planning is to a business. Without long-term planning, a company does not know what it is trying to accomplish. Every department within a company needs to have a plan too so that it can do what it needs to do to help the company achieve its objectives. Even individual employees need to have a plan so that they can help their department achieve its goals. With proper planning, a company can ensure that all of its components are moving in the same direction.

Just like a company, a candidate for a professional exam also needs to have plans, which we can break down into Long-Term, Medium-Term, and Short-Term.

Long-Term Plan

The first plan that you need is a strategic plan that encompasses what you would like to be doing in 5 years in your career, and which professional certification will best help you achieve your plan. You need to know:

  • What are the certifications in your chosen career?
  • What are the certifications most highly valued in the country where you want to work?
  • Which certifications does your company want for its employees?

Once you have selected a certification, you need to find determine:

  • Do you have the necessary education required by the exam? If not, how will you get it?
  • Do you have the necessary experience in order to be certified? If not, where can you achieve the experience?
  • What is the syllabus for the exam and what will you need to study to pass the exams?

Then, you are ready to create a medium-term plan to pass the exams and get any education or experience that you need.

Medium-Term Plan

The medium-term plan should set up a time frame for when you will pass the exams and get the needed education or experience if you don’t already have them. You need to find out what the average time is for preparing for the exam, and when the exams are offered.

For example, you may decide that it will take you 6 months to prepare for each part of the CMA Exam, and so you determine that you want to take Part 1 in early January and Part 2 in late June. Or, maybe you decide that it will take about 3 months to prepare for each Part of the CIA Exam, so you plan to take them in January, April, and July.

You should also decide the order in which you will take the different Parts of the exam. I usually recommend that you start with the Part that you feel will be easiest for you.

Short-Term Plan

You are now ready to start your short-term plans, including making a study schedule for each week. You should know when during the week you will be studying and set these times aside. If you are going to study Tuesday evening for 3 hours (for example), then when someone asks you to do something Tuesday evening, your answer should be that you are busy. Your scheduled study times should be committed appointments that you will not cancel except for an emergency.

Having a schedule will make all of your time less stressful. If you know when you will study, then in the time that you are not studying you can relax without thinking that you should be studying; your study time and your personal time can stay separate.

Just like a plan that helps a business achieve its goals, proper planning will make achieving your goal of earning a certification much easier.

What are some of your planning strategies to help you stay on track with your studies?

Brian Hock, CMA, CIA

You may also like:

Share on:

CMA Exam Risk Management

CMA Exam Risk Management

Many of you have been asking me what you can do to improve your chance of passing your CMA Exam. In this post I talk about risk management and what you can do to help ensure your success on the exam.

Start With Yourself

The first step of risk management starts with yourself. You must know why you are taking the CMA exam (or any professional exam). It can be for a raise, a better job, or because you want to learn the material (the exact reason does not matter). What matters is that you have a specific reason. Passing the exam requires a significant time commitment and if you do not know why you are doing it, you will find many reasons to not study. (See: The Only Question You Need to Answer to Pass the Exam)

Have a Plan

Second, you need to have a plan for studying and passing the exam. As the saying goes, “If you fail to plan, you plan to fail.” I cannot overemphasize this point—make a schedule so you know when you are studying and when you are not studying. (See: Exam Tip: Scheduling for Success and Peace of Mind)

Use Your Study Materials

Third, use your study materials. You cannot learn from your materials if you do not study them. This means that you not only read the textbook, but you study the examples and solve every practice question, both multiple-choice and essay. If you have flash cards, use them. We created flash cards for a reason—they are a very helpful study tool. Our videos are also very helpful and reduce the amount of time needed to study and make the study process a bit easier for most people.

Ask Questions

Fourth, ask questions! As you are studying, certain concepts will be unclear. When this happens, do not ask Google. The CMA exam has very specific content, and very little of what is on the Internet is specific for the CMA exam. A lot of what you find on Google will also be wrong information. You could also just “hope” that they do not ask about a particular topic on the exam, but this is very risky because you cannot predict what the specific topics your exam will cover. Your best option is to ask questions. Please, ask questions! At HOCK, we provide unlimited support to all candidates who purchase our materials because we want you to pass the exam. If the company that you bought materials from does not support you by answering questions, let them know that they should. 

Share the Risk With Another Party

Finally, you can share the risk with another party, which is what car, home, or health insurance do. You hope that you do not need to use the insurance, but if do, you’re very glad that you have it. You can do this for the CMA exam with HOCK’s “You Pass or We Pay” Guarantee. If you follow our program and do not pass the actual exam, HOCK will pay for you to retake the exam. You hope that you do not need to use it, but if you do, you will be very glad that you have it.

Brian Hock, CMA, CIA

 

We are thrilled to introduce a new Live Step-by-Step CMA Part 1 Course! The course will cover the entire syllabus step-by-step including expert teaching, answering practice questions, and strategies for writing essays. The original price is $500, but the course is on sale for $300! Use coupon code ADVANCE to save 40%!

Register Now!

 

Share on:

CMA Part 2 Textbook Update January 2021

The CMA Part 2 Textbook has been updated, and the new files are available for current students to download in My Studies.

This book reflects HOCK’s ongoing commitment to providing the most complete and understandable materials and is not due to a change in the syllabus.

Students who are taking the exams in January-February 2021 should continue to use their existing books to avoid any disruption so close to the end of their studies.

Students who are taking the exams after February 2021 are encouraged to switch to the new version to continue their studies. There is no need to re-study any topics already completed.

If you have any questions about these changes, please contact us and we will be glad to assist you.

You can also learn more about the HOCK CMA Textbooks and other exam prep materials if you are not already a HOCK student.

Share on:

Blog: Making one into one billion

Making one into one billionA week ago, I wrote about how a small regular investment grows over time with compounding interest. A reader recently sent me an illustrative story about compounding that I want to share.

Once upon a time, there was a king who collected almost the entire rice crop harvested by his subjects as tax, promising to give it back during tough times. After many good years, there came a year when there was no crop. However, the King was stingy and unwilling to return the rice as promised. A clever girl did a favor to the king and then asked for a reward.

The reward that she asked for was that she would receive one grain of rice on the first day, and double that on the second day. On the third day, she would receive twice that from the second day. And so on for 30 days. The king thought that it was a modest request and granted it to the little girl.

However, when the King started to pay the reward, he realized what it would become.

On day 6, the little girl received 32 grains of rice.

On day 12, the little girl received 2,048 grains of rice.

On day 18, the little girl received 131,072 grains of rice.

On day 24, the little girl received 8,388,608 grains of rice.

On day 30, the little girl received 536,870,912 grains of rice.

After 30 days, she received a total of 1,073,741,823 grains of rice. (After I read this, I did the math in Excel to make certain that it is correct.)

As you can see, the increase from day to day gets larger the more days that the girl has been “investing.” While no investment offers 100% daily returns, the same concept applies to lower returns and longer periods of time.

I am certain that there are similar stories in many cultures. What version of this story have you heard?

Brian Hock, CMA, CIA

Share on:

Blog: A Resolution for Generations

Resolution for Generations

It is only about two weeks into 2021 and I expect that many New Year’s resolutions have already been forgotten and abandoned. Whether it was to lose weight, study more, or quit smoking, many of us have probably already given up on our resolutions. Perhaps we’ve told ourselves that we will stick to them longer in 2022.

Instead of short-term resolutions that do not last very long, wouldn’t it be nice to have a resolution that could change not only your life, but also the life of the generations that follow you? I have made one such resolution this year, which is to leave a legacy that will allow my income to continue forever for generations following me. This is nothing more than a savings plan, but it is a savings plan that is not for me, but for my children, their children, their children, and so on. It is essentially a family endowment fund that will last for generations. The best news about this resolution is that it is not as difficult as you might think.

We are all familiar with the idea of saving for our retirement. Whether it is a government pension plan, a company plan, our own personal plan, or some combination of these, we are all aware that we are saving (or that we should be saving). Unfortunately, statistics show that many people do not have enough set aside for their own retirement, and now I am suggesting that people save for their great-great-grandchildren? Before dismissing this as impossible, let’s look at some numbers.

(A preface to the numbers: I know that people in different countries have different rates of return available to them. The US stock market has had an annualized compound annual growth rate of 7.47% from 1950 through 2013, and because I live in the US, these are the numbers that I have to work with.)

Let us assume for the purposes of this example a more conservative 6% annual return on investment. This means that in order to have your annual salary be the annual return of a retirement fund, you need to have 17 times your annual salary saved when you retire. If your annual salary is $40,000, then you will need $680,000 saved when you retire.

How do you get to $680,000? Any financial calculator will help you do the math, but if you have $0 saved now and you invest $131 a month for 50 years at 7%, you will have $683,798.19 after 50 years. Then, for every year after that, your children and grandchildren will have $40,000 of annual income, forever. The best part is that $131 a month is less than 4% of a $40,000 annual salary.

Now, let’s change the time frame and look at it from the standpoint of a gift that you can give your children starting when they are born. If you start saving $100 a month for a child when the child is born, that $100 a month at 6.2% for 65 years will be worth $1,005,114! With just $100 a month, your child can be a millionaire when they retire. If we are more optimistic (though perhaps somewhat unrealistic) and use a 9% return, then that same $100 a month will be worth $3,921,762 when your child is 65.

You can also use this plan to help teach your child about saving. If you put $100 a month away for 16 years at 7%, it will be $35,808 when your child turns 16. When your child gets their first part-time job, let’s say that they will start helping pay the $100 a month by paying $10 of it. After they finish college and get a job, you can have them contribute $25 a month, and as they get older increase the percent that they pay increases until they are paying all of it. They will have learned from an early age that saving is the best insurance for the future and will continue to make the payment. Then, when they turn 65, they will have $1.4 million, assuming a 7% average annual rate of return.

I understand that not everyone has access to a consistent 7% return, and that $100 per month may not be realistic in some economies. But also consider that in an economy where salaries are smaller, a smaller amount is needed to be able to generate your annual salary. As a percent, if you save 3% of your salary every month and invest it at 7.2%, you will have a principal that will generate your annual salary in 50 years. Or, at a 6.2% annual return of return, if you save 5% of your salary every month you will have a principal that will generate your annual salary in 50 years.

I invite you to use a financial calculator and play with the numbers. When you do the math, you too may decide to make a resolution that will last for generations.

Brian Hock, CMA, CIA

Share on:

CMA Part 1 Textbook Update January 2021

The CMA Part 1 Textbook has been updated, and the new files are available for current students to download in My Studies.

This book reflects HOCK’s ongoing commitment to providing the most complete and understandable materials and is not due to a change in the syllabus.

Students who are taking the exams in January-February 2021 should continue to use their existing books to avoid any disruption so close to the end of their studies.

Students who are taking the exams after February 2021 are encouraged to switch to the new version to continue their studies. There is no need to re-study any topics already completed.

If you have any questions about these changes, please contact us and we will be glad to assist you.

You can also learn more about the HOCK CMA Textbooks and other exam prep materials if you are not already a HOCK student.

Share on: