Department of Accounting Education

Mabini Street, Tagum City

Davao del Norte
Telefax: (084) 655-9591, Local 116

Big Picture in Focus: ULOa. Explain the basic consideration in

management advisory service.

Metalanguage
In this section, the most essential terms relevant to the study of accounting plus and
to demonstrate ULOa will be operationally defined to establish a common frame of
reference as to how the texts work in your chosen field or career. You will encounter
these terms as we go through the study of accounting plus. Please refer to these
definitions in case you will encounter difficulty in the in understanding accounting plus
concepts.
1. Consultant. It is someone who has expertise in a specific areas and
offers unbiased opinion and advise for a fee.
2. Management Advisory Services. A professional services provided by
independent accounting firms which primary purpose is to improve the
client’s use of its capabilities and resources to achieve the objectives
of the organization.
3. Management Consulting. An independent and objective advisory
service provided by a qualified person to clients in order to help them
identify and analyze management problems or opportunities.
Management consultants also recommended solutions or suggested
actions with respect to these issues and help, when requested, in their
implementation.
4. Consultation. This consists of providing advice and information during
a short time frame. This advise and/or information is provided orally
during one or more discussions with client.

Essential Knowledge
To perform the aforesaid big picture (unit learning outcomes), you need to fully understand
the following essential knowledge laid down in the succeeding pages. Please note that you
are not limited to exclusively refer to these resources. Thus, you are expected to utilize other
books, research articles and other resources that are available in the university’s library e.g.
ebrary, search.proquest.com etc., and even online tutorial websites.

1. INTRODUCTION
A consultant is not an employee but an independent contractor usually self-employed,
contracted to perform a short-term or long-term task and maybe paid on an hourly,
daily or project basis or other fee arrangement. Anyone can become a consultant but
becoming a successful consultant is not that easy. It requires expertise and good
business skills and even a motivation to provide a consulting services to others for.

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 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

2. EVOLUTION OF MANAGEMENT ADVISORY SERVICES

Traditionally, CPA firms provide auditing service, designing and installing of
accounting system to their clients and tax services. When CPA’s found some problems
during the course of their engagement in their client’s business, they normally reported
it to their clients and give some suggestions for corrective actions. And then, their
clients engaged CPA to make a thorough investigation to solve the business problem.
Because of that situation, many firms offer a separate professional service which is
the consulting service. Because of the rapid development in businesses with the
corresponding increase in its complexity, the demand for the consulting service also
increases. The management advisory services extend to the other areas of the
business which create a pressure to the CPA’s in maintaining the independence.
Therefore, the accounting firm must limit itself to providing advice and technical
assistance to clients and avoid taking managements decisions that might impair its
independence.
2.1. Developing Trends
The practice of management consultancy has been evolving because nowadays it
specializes in information systems, automated offices, financial analysis and modelling
budget and cost controls, organization structures, personnel compensation, strategic
planning and in the other areas of business environment. Improvement in business
education is another trend. A better-trained entrants into the consulting profession who
are quality graduates and undergraduates from a business courses may become a
catalyst for the advancement of better management concepts and techniques. Change
in management culture and growth in the size and complexity of the business also
propelled the need for management consultants. Competition may also cause the
business to have a consultants to stand in the market. Technological advancement
may also drive the need for a specialized skills in the computer environment.
2.2. Future Prospects
Because of the development and transformations, the following are the predictions
from a veteran management consultant:
2.2.1 Management consulting will become even more specialized. Consulting
firms will need to continually add new specialties, just as manufacturing
firms add new products.
2.2.2 The consultant’s orientation will be towards being an insight-provider,
creator and sharer of information.
2.2.3 Management consulting firms will tend either to remain small or to become
quite large. Small firms will prosper by focusing upon narrow areas of
specialization while large firms will have to develop and offer a wide range
of services to sustain their high costs of operations.
2.2.4 As consultants grow in number, they will develop more sophisticated means
of marketing their services.
2.2.5 Bright graduates of accounting, management and business schools will
continue to be attracted to careers in management consulting.

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 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

2.3 The Consulting Industry

Consultancy includes the following consulting industries:
2.3.a. Information Technology (IT).
2.3.b. Consulting and system integration.
2.3.c. Corporate strategy.
2.3.d. Operations management.
2.3.e. Human resources management.
2.3.f. Outsourcing.

2.4. Main Types of Consultant Firms

2.4.1. IT Firms
IT companies have increasingly looked towards consulting as a means of increasing
revenue. The recent trend has been to buy consulting business, for example, IBM’s
purchases of PwC Consulting. As a result, IBM has significantly increased its market
shares in consulting businesses.

2.4.2. Accounting Firms Offering Consultancy

A major change in US accounting practice occurred following the Anderson’s woes
and the consequent implementation of the Sarbanes-Oxley law. Many accountancy
firms have sold off their mainstream consulting operations either to management or to
other consultancies (particularly IT). Consultancy services are still offered but they
tend to have narrow focus around financial and transactions (mergers and acquisition)
services.

2.4.3. Major Consulting Only Firms

There are a number of large firms with global reach. They offer range of services nut
their core business is consulting. The big names are MCKinsey & Co.; Accenture and
Mercer Management Consulting; IBM; Atos KPMG Consulting; Deloitte Consulting
and Cap Gemini Ernst & Young.

2.4.4. Independents
Many individuals run their own consulting services as sole traders, as small limited
companies and partnerships. They offer a range of services, often quite specialized.
Professional bodies such as PICPA offer professional training and accreditation and
provide a forum for all important networking.

2.5. Career Structure in Consulting Firms

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 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

Management consultancies can be hierarchal in their structures especially the larger

firms. The following are the common roles in management consultancies in ascending
order of seniority.
2.5.1. Analysts
Most graduates would start here. They are responsible for gathering information and
processing it for the consulting team. Only large firms offer this positions.

2.5.2. Consultants
These are either analysts who have been promoted after a couple of years or those
who have been in industry and have moved to consulting as a career change.
Consultants undertake the evaluation of the client business and make
recommendations on its behalf.

2.5.3. Senior Consultants or Manager

More experienced consultants have responsibility for leading a consulting team in
undertaking a projects on behalf of a client. They would typically have 3-5 years of
consulting experience and have already demonstrated their ability to take on the
responsibility of running small consulting projects. They would also be more involved
in dealing with members of the client team.

2.5.4. Business Development Managers

They are responsible for developing the firm’s product and building its relationship with
clients. They will also be involved in some large, complex consulting projects at a
strategic level. Most at this level would have 5-10 years of consulting experience.

2.5.5. Directors or Partners

They are the most experienced consultants who take responsibility for the
development of the organization as a whole and who lead its strategic companies and
will have overall responsibility for projects. They are expected to have 10 years or
more of experience in the practice of consultancy.

3. NATURE OF MAS BY INDEPENDENT ACCOUNTING FIRMS

Management advisory services by the independent accounting firms can be
described as the function of providing professional advisory (consulting) services and
the primary purpose of which is to improve the client’s use of its capabilities and
resources to achieve the objectives of the organization.

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 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

Management consulting can also be described as an independent and objective

advisory service provided by qualified persons to clients in order to help them identify
and analyze management problems or opportunities. Management consultants also
recommended solutions or suggested actions with respect to these issues and help,
when requested, in their implementation.

An engagement consists of that form of management advisory or consulting service

in which an analytical approach and process is applied in a study or project. This
approach typically involves:
1. Ascertaining the pertinent facts and circumstances.
2. Seeking and identifying objectives.
3. Defining the problem or opportunity for improvement.
4. Evaluating and determining possible solutions.
5. Presenting findings and recommendation, and
6. Implementing the solutions, if appropriate.

And following the client’s decision to proceed, the independent accounting firm may
also be involved in:
- Planning and scheduling actions to achieve the desired results, and
- Advising and providing technical assistance in implementing,

in combination with knowledge and experience in such areas as:

- Organization and management methods
- Office and management functions
- Systems and procedures
- Data processing methods
- Quantitative methods (mathematics, statistics, etc.) and
- Financial management,

To produce solutions such as:

- A management information system
- A sales reporting system
- A cost accounting system
- A work engagement program
- Improved production control
- An organization plan with statements of duties and responsibilities, or
- An electronic data processing system.

4. RATIONALE FOR USING MANAGEMENT CONSULTANTS

Consultants, although, they are not expected to be familiar with the organization as
the manager and administrator but they are engaged by the client’s administrator
because consultants are generally has lesser cost of service they provide than hiring
a new manager or employee.

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 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

Four (4) valuable reasons of hiring management consultants:

4.0.1 Independent viewpoint
A consultant is considered independent, objective and detached to the
problems faced by the organization. The consultant is not involved in the
internal policies of the organization, his or her suggestions tend to be
accepted as unbiased.
Consultants are retained as impartial adviser without any vested interest in
the outcome of the recommendations. When there are issues inside the
organization, an internal employee may not be able to see the problems or
may not be sufficiently objective, so the consultant can perform a competent
and thorough analysis of the issues. Psychologically, it is easier for the
personnel to take external advice rather than the internal advice of someone
who may be acting out of self-interest.

4.0.2 Professional advisor and counsellor

An experienced management consultant possesses special knowledge,
skill, and variety of personal attributes that make him the most desirable
candidate to undertake and engagement involving his areas of expertise.
Furthermore, an experienced consultant can introduce new ideas into the
organization that were gleamed from other engagement. Although the law
does not restrict the practice of management consultancy only among
CPA’s, business firms generally prefer CPAs to act as their management
consultant. Because of the persuasive nature of accounting, the academic
training and examination of requirement for the CPA certificate, a CPA has
broad base on which to build a management services practice.
Consultants are hired to provide in-house training to keep staff informed a
new management and supervisory techniques or technical knowledge and
to improve employee morale.

4.0.3 Temporary professional service

Hiring a new managers to provide professional advisory service is more
costly than hiring a consultant. Sometimes, business organization
encountered a short-lived or cyclical need in the operation and through this,
consultant can provide a temporary professional service to them. Consultant
may be hired on a project, seasonal, or new funding basis. When hiring a
consultant, client can avoid the long-term commitment for the salaries and
fringe benefits that would have been when hiring a skilled permanent
employee.

4.0.4 Agent of Change

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 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

A management consultant can act as a catalyst for change and stimulating

ideas in a highly structured organization that otherwise might be resistant to
change due to size, bureaucracy, and institutionalized nature.

4.1. Independent Accounting Firm’s Role in MAS

The role of an independent accounting firm in performing management advisory
services is “to provide advice and technical assistance which should provide for
client participation in the analytical approach and process. Specifying this as
the proper role recognizes both the appropriate place of MAS and the realities
of practice. This is the only basis on which the work should permit it to be done.”
Consultant should not carry out the recommendations he made since he has no
authority to marshal client resources and make management decisions. If he allow to
take the role of management, then he ceases to be a consultant. In other words,
accounting firm should avoid making management decisions or taking positions that
might impair the firm’s objectivity.

5. CPA’S OBJECTIVE IN ENGAGING IN MAS

An independent accounting firm’s purpose in engaging in MAS is “to utilize the
essential qualifications it has available to provide advice and technical
assistance which will enable client management to conduct its affairs more
effectively.”
The essential qualifications are based in part on attributes acquired in conducting
other aspects of practice and include the following:
5.0.1 Technical competence.
5.0.2 Familiarity with the client’s finance and control systems and his business
problems.
5.0.3 Analytical ability and experience in problem solution.
5.0.4 Professional independence, objectivity and integrity.

Self-Help: You can also refer to the sources below to help

you further

*Agamata, F. T. (2012). Reviewer in management advisory services. Manila:

GIC Enterprises & Co., Inc.
*Bobadilla, D. (2015). Comprehensie reviewer in management advisory
services. Manila, Philippines: Lares Bookstore.
*Bragg, S. M. (2011). The controller’s function: The work of the managerial
accountant (4th ed.).New Jersey: John Wiley & Sons.

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 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

*Cabrera, M. E. (2009). CPA reviewer :Management advisory services (2009

ed.). Manila: GIC Enterprises & Co.
*Cabrera, M.B. (2011). Management consultancy. Philippines: GIC
Enterprises & Co., Inc.
*Jackson, S. R.(2009). Managerial accounting: A focus on ethical decision
making ( 5th ed). Mason, OH: South – Western Cengage Learning.

Let’s Check
Questions:
1. Why do small companies need the services of management consultants?

2. Distinguish between consultation and engagement.

3. What advantages do CPAs have over other professional in so far as providing

business advisory services to their clients are concerned?

4. What impact on management consulting practice would technological

developments and globalization have on management consultancy profession?

5. Give and explain briefly at least four reasons for using management
consultants.

Let’s Analyze
Question:
1. Which of the following statements is false?
A. New developments and transformation could result to management
consulting becoming more specialized.
B. It is predicted that a consultant’s orientation will be towards being an insight-
provider, creator and sharer of information.
C. As consultants grow in number, they tend to develop more sophisticated
means of marketing their services.
D. Because of the more stringent and technical qualifications required in
management consulting, more not-so-bright graduates of accounting,
management and business schools will be attracted to career in this area.

2. Most definition of consultancy would include such service related to the

following except
A. Information Technology
B. Corporate Strategy
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 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

C. Legal Advisory
D. Systems & Operation Management

3. Which of the following statements is incorrect?

A. A consultant is hired because generally he is considered independent,
objective and detached to the problems faced by the organization.
B. An experienced management consultant possesses special knowledge,
skills and a variety of personal attributes that make him the most desirable
candidate to undertake management consulting engagement involving area
of expertise.
C. The use of consultants generally much more expensive to the company than
hiring a full time new managers and employees to provide professional
advisory services.
D. A consultant is considered a catalyst for change that can assist
management in the administration of the business entity.

4. The actual output of a consulting engagement centers on providing the

business organization with
A. Valuable information
B. Support for internal arguments.
C. Support in acquiring a critical resource.
D. Support for contesting tax assessment by the BIR.

5. Which of the following statements is false?

A. CPAs have historically been business consultants to their clients.
B. Management consultants are licensed and regulated by laws.
C. The primary purpose of management consultancy is to improve the firm’s
use of its capabilities and resources to achieve its objectives.
D. Management consultancy services are provided not only to big business
enterprise but also to medium-size and small companies.

In a Nutshell
List down below all the things that you have learned from this ULO.
1. ____________________________________________________________
___________________________________________________________.
2. ____________________________________________________________
___________________________________________________________.
3. ____________________________________________________________
___________________________________________________________.
4. ____________________________________________________________
___________________________________________________________.

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 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

5. ____________________________________________________________
___________________________________________________________.
6. ____________________________________________________________
___________________________________________________________.
7. ____________________________________________________________
___________________________________________________________.
8. ____________________________________________________________
___________________________________________________________.
9. ____________________________________________________________
___________________________________________________________.
10. ____________________________________________________________
___________________________________________________________.

Q&A Lists
Do you have any questions?
Questions/ Issues Answers
1.
2.
3.

Keyword Index
Analysts Engagement
Business Development Managers Independence
Consultant Management Advisory Services
Consultation Management Consulting
Directors or Partner Senior Consultants or Manager

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