MS MASTERY – MS BASICS

UNIVERSITY OF THE CORDILLERAS

College of Accountancy

MANAGEMENT ADVISORY SERVICES DEFINED:

Management advisory services refer to the function of providing professional advisory
(consulting) services, the primary purpose of which is to improve the client’s use of its
capabilities and resources to achieve the objectives of the organization.

CHARACTERISTICS OF MANAGEMENT ADVISORY SERVICES:

1. Service is for management
2. Related to the future
3. Problem solving
4. Non-recurring
5. Broad in scope
6. Varied assignments
7. Greater job specifications
8. Require good human relations

MANAGERIAL ACCOUNTING vs. FINANCIAL ACCOUNTING

Bases of Comparison Managerial Financial
a. Users internal external
b. Nature of reports special general
c. Time frame future historical
d. Reporting standards flexible GAAP
e. Analysis of data subjective objective
& Objective

AREAS OF MANAGEMENT ADVISORY SERVICES:

1. The management functions of analysis, planning, organizing and controlling.
2. The introduction of new ideas, concepts and methods to management.
3. The improvement of policies, procedures, systems, methods and organization
relationship.
4. The application and use of managerial accounting, control systems, data
processing and mathematical techniques and methods.
5. The conduct of special studies, development of plans and programs, preparation
of recommendations and provision of advice and technical assistance in their
implementation.

ADVANTAGES OF A CPA OVER OTHER MANAGEMENT CONSULTANTS:

1. The CPA is a member of a profession with recognized standing.

2. An accounting practitioner offers an advantageous position upon which to build a
management services practice.
3. The CPA is already familiar with the client's business.
4. The CPA is known by the client and enjoys his confidence.
5. The CPA is knowledgeable in accounting and taxes.

TREASURERSHIP vs. CONTROLLERSHIP FUNCTIONS

1. Provision of Capital
2. Investor relation
3. Short-term financing
4. Banking and custody
5. Credits and collection
6. Investments
7. Insurance
1. Planning and control
2. Reporting and interpreting
3. Evaluating and consulting
4. Tax administration
5. Government reporting
6. Protection of assets
7. Economic appraisal

CHARACTERISTICS OF MANAGERIAL ACCOUNTING REPORT

1. Relevance
2. Timeliness
3. Accuracy
4. Clarity
5. Conciseness
MS MASTERY – MS BASICS

MANAGEMENT ADVISORY SERVICES PRACTICE STANDARDS:

1. Personal Characteristics
a. Integrity c. Independence
b. Objectivity
2. Competence
a. Analytical proficiency
b. Knowledge and techniques
3. Due Care
4. Client Benefit
5. Understanding with the client
6. Planning, Supervision and Control
7. Sufficient relevant data
8. Communication of results

ETHICAL CONSIDERATIONS IN MANAGEMENT ADVISORY SERVICES:

Professional limitations or restrictions imposed by the ethical codes:
a. Solicitation of clients and encroachment.
b. Advertising
c. Use of the CPA's name
d. Division of profits and fees with the laity
e. Incompatible occupation (independence/integrity)
f. Contingent fees
g. Competitive fees
h. Forecasts

STAGES IN MAS ENGAGEMENT:

1. Negotiating the engagement
2. Preparing for and starting the engagement
3. Conducting the engagement
4. Preparing and presenting the report and recommendations.
5. Implementing the engagement
6. Evaluating the engagement
7. Post-engagement follow-up

CONFIRMATION OF THE UNDERSTANDING IN WRITING:

a. Letter of Proposal
A letter of proposal includes the following:
1. The objectives and benefits of the engagement
2. The scope of the work and the role of the CPA
3. The approach to the study
4. The project organization
5. Fees and billing arrangements
6. Firm qualifications where appropriate

b. Letter of Agreement

ENGAGEMENT PROGRAM - a detailed plan, usually in writing, for carrying out a management
services engagement.
a. Contents of an Engagement Program
1. The objectives and description of each task to be accomplished
2. A description of tangible output required at completion of each task
3. A list of the manpower required
4. A list of the personnel assigned
5. The starting and completion dates

b. Conducting the Engagement

In general, the conduct of an engagement may be divided in two phases:
1. Gathering of data, and
2. Evaluating or analyzing the data gathered

c. Standard Techniques Utilized by Consultants in Fact-Finding:

1. Personal interviews
2. Document reviews
3. Previous studies
MS MASTERY – MS BASICS

4. Observations
5. Charting

PREPARING AND PRESENTING THE REPORT AND RECOMMENDATIONS:

a. Interim report
b. Final report
1. Long form report
2. Short-report Letter

MAS BY CERTIFIED PUBLIC ACCOUNTANTS (CPA’s)

CPA’s performing MAS are considered in the practice of accountancy and are bound
by the Code of Ethics for Professional Accountants.

ESSENTIAL ATTRIBUTES THAT MAKE A CPA QUALIFIED TO RENDER MAS

 Technical competence
 Familiarity with the clients finance and control systems and business problems
 Analytical ability and experience in problem solution
 Professional independence, objectivity and integrity

SCOPE OF MAS BY CPA’s

MAS are usually related to the services rendered by CPA’s in the areas of auditing, tax,
and accounting, and may involve activities such as:
 Counselling management in its analysis, planning, organizing, operating, and controlling
functions.
 Reviewing and suggesting improvements of policies, procedures, systems, methods, and
organizational relationships.
 Introducing new ideas, concepts, and methods to management
 Conducting special studies, proposing plans and programs, and providing guidance and
technical assistance in their implementation.

ADVANTAGES OF CPA’s OVER OTHER PROFESSIONALS IN MAS PRACTICE

 They are already familiar with the client and its business, and enjoy the client’s
confidence
 They are members of a profession with recognized standing and equipped with
technical know-how in accounting and taxation

TYPES OF CLIENTS SERVED BY CPA’s IN MAS ENGAGEMENTS

1. Private-owned business firms
2. Governmental agencies and organizations
3. Not-for profit non-governmental organizations
4. Professional associations or organizations
5. Others (labor unions, religious organizations)

VARIOUS TYPES OF MANAGEMENT ADVISORY SERVICES BY CPA’s

1. MANAGERIAL ACCOUNTING-RELATED SERVICES=this involves providing assistance to

management related to planning and controlling business operations as well as decision-
making. Examples are cost reduction studies, cost accounting systems, financial
statement analysis, budgeting and their preparation, variance analysis and responsibility
accounting.

2. FINANCIAL MANAGEMENT-RELATED SERVICES=this involves the study of working capital

and long-term capital requirements as well as analysis and study of capital investment
proposals. Examples are capital budgeting, working capital management, study on cost
of capital and optimal capital structure.

3. DESIGNS AND APPRAISAL OF ACCOUTING SYSTEM=this involves development of an

accounting system for a newly organized firm or the revision, partial or complete, of an
existing accounting system. Examples are systems engagement and accounting
software selection and implementation.

4. GLOBAL-RISK MANAGEMENT SOLUTION=this involves managing the totality of risks-

financial, operational and systems, and strategic to improve financial and business
MS MASTERY – MS BASICS

performance. Examples are financial risk management, strategic risk management;

systems risk management, compliance risk management and internal audit services.

5. TRANSACTION SERVICE=this involves services related to mergers, acquisition, divestitures,

joint ventures and strategic alliances. Examples are due diligence services to uncover
potential financial and strategic risks and rewards.

6. OTHER SERVICES:
 Project feasibility studies
 Operations research (quantitative methods)
 Industrial engineering
 Financial advisory services
 Project finance and privatization
 Valuation services
 Business recovery services
 Dispute analysis and investigations
 Computer risk management
 Organizational management and marketing consultation