MANAGEMENT ADVISORY SERVICES

OVERVIEW OF MANAGEMENT ADVISORY SERVICES PRACTICE BY CPAS

OCTOBER 2019 BATCH

J.A. SIMBILLO

PURPOSE:

The Primary Purpose of Management Advisory Services (MAS) is to help improve client’s use of its
capabilities and resources in order to achieve its objectives.

In conducting MAS, the CPA should function only in the capacity of advisor and not as decision maker or
member of management. MAS are engagements or consultations and NOT recommendations and comments as
direct result of observations during audit or review.

DEFINITIONS:

MANAGEMENT ADVISORY SERVICES – The function of providing service and technical assistance where the
primary purpose is to help the client improve the use of its capabilities and resources to achieve its objectives.

This includes the following:

 Counseling management in analyzing, planning, operating and controlling functions.
 Conducting special studies and preparing recommendations.
 Reviewing & suggesting improvement of policies, procedures, systems, methods, etc.
 Introducing new ideas, concepts and methods.

MAS ENGAGEMENT – The form of MAS in which an analytical process in applied to a study or project.

MAS CONSULTATION – The form of MAS based on existing personal knowledge about the client, its
circumstances, the matters involved, and the mutual intent of the parties.

MAS PRACTITIONER – One who performs a MAS service for a client of a PICPA member or a PICPA member who
himself performs such service.

MAS LETTER OF PROPOSAL – It is written by the CPA and constitutes the CPA’s understanding of the work to be
done in an MAS engagement. It should contain the objectives, scope, approach, role of personnel, timing and fees,
benefits of the proposed plan, and the manner in which the end-results are to be communicated.

STANDARDS FOR MAS PRACTICE

GENERAL STANDARDS:
1. Professional Competence – only such activities that a practitioner can reasonably expect to complete
with professional competence should be undertaken.
2. Due Professional Care – A practitioner should always exercise due care in the performance of any MAS
service.
3. Planning and Supervision – Every MAS engagement should be properly planned and supervised.
4. Sufficient Relevant Data – A practitioner should obtain sufficient relevant data to afford a reasonable
basis for conclusions or recommendations.
5. Forecasts – Practitioner’s name shall not be used in a manner, which may lead to the belief that he
vouches for the achievability of a forecast.

TECHNICAL STANDARDS:
1. Role of MAS Practitioner - an MAS practitioner should not assume the role of management or act in any
manner that would impair his objectivity.
2. Understanding with Client - An oral or written understanding should be reached concerning the nature,
scope, and limitations of the engagement.
3. Client Benefit - The client should be advised of any reservations regarding the potential benefits of a
proposed engagement. Specific results should never be implicitly or explicitly guaranteed. Any
quantifiable results, which are estimated should be identified as estimates and proper support should be
provided. '
4. Communication of Results - All significant information, including any limitations, qualifications, or
reservations, should be presented to the client.
MAS ENGAGEMENTS

NATURE OF MAS ENGAGEMENTS:

1. This involves gathering and analyzing appropriate information in order to develop conclusions and
recommendations.
2. Engagements vary widely in size, complexity, staffing and time requirements, and technical subject
matter. A practitioner may require the assistance of other qualified professionals.
3. Where a practitioner is asked to respond to any inquiry on an MAS matter that is not the subject of the
engagement, both the inquiry and response may fall within the definition of an MAS Consultation and the
standards for that type of service would apply.

PROFESSIONAL COMPETENCE IN MAS ENGAGEMENTS:

1. Professional Competence includes ability to:
a. Identify and define client needs.
b. Select and supervise staff.
c. Select and apply analytical process.
d. Apply relevant technical knowledge.
e. Effectively communicate and assist in implementation of recommendation.
2. Evaluating competence for engagement.
a. Assess combined abilities, education and experience of staff (or other individuals retained for this
engagement) and client personnel committed to this project.
b. Compare diverse skills needed with abilities available.

PLANNING AND SUPERVISION IN MAS ENGAGEMENTS:

1. Practitioner should plan and supervise engagement in order to provide reasonable assurance that work
is in accordance with:
a. Understand with client
b. Professional Standards
2. If staff is needed, determine that sufficient numbers of skilled individuals are available.
3. Plan should be developed that:
a. Guides conduct, supervision, control and completion of an engagement
b. Can be modified as necessary during engagement
c. Includes consideration of the approach and tasks required for completion.
4. Level of documentation and amount of supervision
a. Is determined by professional judgment.
b. Criteria for judgment include skills of individuals involved and time and complexity of
engagement.
5. Direct of MAS engagement requires competence to:
a. Supervise personnel
b. Evaluate quality and completeness of work performed.
c. Accept responsibility for successful completion of engagement

DUE PROFESSIONAL CARE IN MAS ENGAGEMENTS:

A MAS practitioner must apply his knowledge and skill with reasonable care and diligence. He does not,
however, assume responsibility for infallibility.

SUFFICIENT RELEVANT DATA:

1. Should be obtained in order to complete engagement in manner consistent with client understanding:
a. May be obtained by interview, observation, computation, research, analysis and review of client
documents.
b. Nature and quality of information necessary will vary with scope and circumstances of
engagement.
2. Professional judgment should be exercised in determining what constitutes sufficient relevant data. The
practitioner should consider:
a. Objectives, nature and scope of engagement
b. Cost of gathering data versus the benefits of added data
c. Intended use of results
d. Source, reliability and completeness of data.

ROLE OF PRACTITIONER IN MAS ENGAGEMENTS:

1. Assume role of "Objective Advisor"
a. Should not assume role of management.
b. Roles of all parties should be clearly defined
 2. Management should always be able to make decisions by reviewing and approving the findings,
conclusions, recommendations and other results.

UNDERSTANDING WITH CLIENT IN MAS ENGAGEMENTS:

1. In reaching an understanding with client, the practitioner should consider:
a. Objectives and scope of engagement including nature of services to be performed.
b. Relationships, roles and responsibilities of the practitioner, client, and third parties.
c. Major tasks and activities to be performed and methods to be used.
d. The manner in which results are to be reported.
e. Work schedule and fee arrangements.
2. There should be a documented understanding with a client in the form of an accepted proposal letter,
confirmation letter, engagement arrangement letter, contract, or file memorandum documenting an oral
understanding.
3. The understanding should be modified where circumstances requires. ·

CLIENT BENEFIT IN MAS ENGAGEMENTS;

1. The practitioner should obtain an understanding, before beginning the engagement, of the benefits
desired by the client.
2. Results should never be guaranteed by the practitioner. Achievability of results is generally dependent
on the effectiveness of implementing the proposals and recommendations.
3. Any quantified potential benefits should be described as estimated and proper support should be
provided.

COMMUNICATION OF RESULTS IN MAS ENGAGEMENTS:

1. The major findings, conclusions, and recommendations should be communicated to the client
2. The assumptions used to obtain the major findings, conclusions, and recommendations should also be
communicated to the client.
3. Interim client communication is desirable during lengthy engagements. This encourages client
involvement and decision-making.
4. Final reports may be written or oral, depending on:
a. Understanding with the client
b. Degree to which progress is reported during the course of the engagement
c. Intended use of the results
d. Sensitivity of material covered
e. Need for a formal report
5. When a written report is not issued, the practitioner should prepare a memorandum to his file outlining
the results achieved and documentation provided to the client.

MAS CONSULTATIONS

NATURE OF MAS CONSULTATIONS

1. Consultations may occur concurrently with other services such as audit, review or compilation of
financial statements, tax services or a MAS Engagement
2. Consultations may involve a single matter or cover a wide variety of items.
3. Interaction may via telephone, non-business setting, periodic meetings or formal writings.
4. MAS Consultation include:
 Advice in the form of explicit recommendations.
 Guidance on a suggested course of action.
 Limited analysis of options or the advantages or disadvantages of specific actions.
 Fact finding in the form of limited technical research of a specific matter.

DUE PROFESSIONAL CARE IN MAS CONSULTATIONS

The practitioner should exercise the care that advice is clearly communicated and that it does not generate a
degree of reliance that is inappropriate in light of qualifications that apply to the advice.

PLANNING AND SUPERVISION IN MAS CONSULTATIONS

1. The nature of planning depends on the complexity of the inquiry.
2. Planning is based on an understanding of the inquiry and the nature of service asked by the client.
3. Where staff is involved, supervision required is dependent upon their qualifications and experience.

SUFFICIENT RELEVANT DATA IN MAS CONSULTATIONS

1. Where the advice given is based upon information supplied by the client that is not verified,
corroborated or reviewed, the client should advised that such advice is based on the accuracy of the
information supplied.
 2. Where the practitioner believes that the information provided is insufficient, he should consider
qualifying his advice or refraining from giving any advice.

TECHNICAL STANDARDS FOR MAS CONSULTATIONS:

1. Role of MAS Practitioner - should not assume role of management or any position that might impair his
objectivity.
2. Understanding with Client - oral or written understanding should be reached with client outlining the
nature, scope and limitations of consultation to be performed.
3. Client Benefit - client should be advised for any reservations regarding the potential benefits of a
proposed consultation. Specific results should never be implicitly or explicitly guaranteed. Any
quantifiable results, which are estimates, should be identified as estimates and support should be
provided.
4. Communication of Results - significant information, including any reservations, limitations, or
qualifications should be presented to the client.

ROLE OF PRACTITIONER IN MAS CONSULTATIONS:

1. The practitioner should be careful to avoid misleading the client in to believing that the practitioner.
a. Assumes responsibility for making decisions;
b. Guarantees the benefits the client seeks;
c. Predicted his advice on full consideration of all relevant information.

CLIENT UNDERSTANDING AND COMMUNICATION OF RESULTS IN MAS CONSULTATIONS:

1. Attention should be given to be sure that both parties understand:
a. The specific or general nature of advice sought;
b. The financial significance of any advice given;
c. The complexity of the inquiry, the advice or qualification which might exist.
2. The nature and form of communication with a client is a matter of the practitioner’s professional
judgment. Advice may be oral or written, depending on the circumstances.

QUALIFICATIONS OF A CPA IN MAS PRACTICE:

1. Professional and technical competence.
2. Familiarity with the client's financial accounting and internal control systems.
3. Analytical experience in problem solving.
4. Professional independence, objectivity and integrity.

COMPETENCE IN MAS INVOLVES:

1. Knowledge and education
2. Experience and specialized training.
3. Technical skills.
4. Supervisory skills.
5. Research capability
6. Ability to apply analytical approach in problem solving

MAS ANALYTICAL APPROACH INVOLVES:

1. Ascertaining the pertinent facts and circumstances
2. Identifying objectives
3. Defining the problem or opportunity for improvement
4. Evaluating possible outcomes
5. Presenting findings and recommendations
6. If adopted, practitioner may also be involved in:
a. Planning and scheduling implementations
b. Advising and providing technical assistance for implementation

GUIDELINES TO ASSIST CPA FIRM IN DEFINING SCOPE AND CONDUCT OF MAS:

1. Scope - Each CPA firm is responsible for establishing the scope of its MAS practice.
2. Independence - The practitioner must take care to remain independent in fact and appearance.
3. Competence - The practitioner must have necessary competence to perform a MAS engagement or
consultation.
4. Specialization - A CPA's MAS practice will be limited if he does not have specialized competence in MAS
areas requiring such competence.
5. Client's Problems - The practitioner must be able to both identify and solve the client's problems he is
applying MAS to.
6. Referrals - A practitioner may refer portions of the engagement to qualified individuals.
7. Code of Ethics - The PICPA Code of Ethics applies in MAS practice.
AREAS OF KNOWLEDGE IN MAS ENGAGEMENT:
1. Organization and management methods
2. Office and management functions
3. Systems and procedures
4. Data and processing methods
5. Quantitative methods
6. Financial Management

OUTPUTS OR SOLUTIONS IN MAS ENGAGEMENT:

1. Management and information systems
2. Sales reporting systems
3. Cost accounting systems
4. Work measurement systems
5. Improved production control
6. Organizational plan
7. Electronic Data Processing system

STEPS IN MAS ENGAGEMENTS:

1. Analysis - Concerned with ascertaining facts and circumstances, seeking and identifying objectives and
defining the problem or opportunity for improvement.
2. Design – Concerned with determining and evaluating possible solutions and presenting findings and
recommendations.
3. Implementation - Concerned with planning and scheduling actions to achieve the desired results and
advising and providing technical assistance in implementing the recommendations. ·

IMPLEMENTATION IN MAS ENGAGEMENT:

a. Steps must be taken to see that the client:
b. Understands the implications.
c. Makes a firm decision to proceed with implementation.
d. Accepts overall responsibility.
e. Has expertise to handle implementation.
f. Has knowledge to maintain the systems.

TYPES OF MAS ENGAGEMENTS:

1. Full Scope Engagements - A MAS practitioner participates in all three steps, i.e., in analysis, design and
implementation. It is highly recommended that the functional areas involved in the engagement be
represented on a client team. The practitioner should also ensure that a senior client group is organized
to make decisions, and to monitor and approve the programs. He gives advice on both the overall program
and on the organization and composition of the participating groups of client personnel.

2. Limited, Special Study Engagement - In this engagement the client is seeking an impartial or objective
study of a particular area such as the selection of computer equipment. The practitioner participates
through the analysis and design steps with the client carrying-out the implementation step himself.

3. Limited Client Involvement - The practitioner should be cautious of limited client involvement in the
engagement. The client must be able to both assume complete responsibility for the changes in his
organization and carry on the program after implementation.

GUIDELINES FOR FINANCIAL FORECASTS:

The following should be taken into consideration in making forecasts:

1. Accounting principles in effect.

2. Prepared by qualified personnel
3. Use the best available information
4. Assumptions made are reasonable
5. Provide adequate documentation
6. Comparison with attained results
7. Adequate review and approval by management.