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BASIC CONSIDERATIONS IN MAS

RHAD VIC F. ESTOQUE, CPA, MBA, RCA, CAT, MICB, CMA

BASIC CONSIDERATIONS IN MS
RHAD VIC F. ESTOQUE, CPA, MBA, RCA, CAT, MICB, CMA
CPALE Syllabus Covered
1.0 Management Accounting
1.1 Objectives, role and scope of management accounting

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1.1.1 Basic management functions and concepts
1.1.2 Distinction among management accounting, cost accounting and financial
accounting

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1.1.3 Roles and activities of controller and treasurer
1.1.4 International certifications in management accounting
1.1.5 Global trends in management accounting

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1.1.1 BASIC MANAGEMENT FUNCTIONS AND CONCEPTS
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.

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Top level planning: also known as overall or strategic planning. It encompasses the long-range objectives and
policies or organization and is concerned with corporate results rather than sectional objectives
Business-level strategy focuses on how to attain and satisfy customers, offer goods and services that meet their
needs, and increase operating profits.
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A corporate-level strategy is when a business makes a decision that affects the whole company.
Operational strategies refers to the methods companies use to reach their objectives.

Basic Functions of Management

1. Planning- It is the basic function of management. It deals with chalking out a future course of action & deciding in advance
the most appropriate course of actions for achievement of pre-determined goals
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2. Organizing - It is the process of bringing together physical, financial and human resources and developing productive
relationship amongst them for achievement of organizational goals.
3. Staffing- It is the function of manning the organization structure and keeping it manned.
4. Directing - It is that part of managerial function which actuates the organizational methods to work efficiently for
achievement of organizational purposes.
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Supervision- implies overseeing the work of subordinates by their superiors. It is the act of watching & directing
work & workers.
Motivation- means inspiring, stimulating or encouraging the sub-ordinates with zeal to work.
Leadership- may be defined as a process by which manager guides and influences the work of subordinates in
desired direction.
Communications- is the process of passing information, experience, opinion from one person to another.
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5. Controlling - implies measurement of accomplishment against the standards and correction of deviation if any to ensure
achievement of organizational goals.

1.1.2 DISTINCTION AMONG MANAGEMENT ACCOUNTING, COST ACCOUNTING AND FINANCIAL ACCOUNTING
Seven key differences between managerial accounting and financial accounting as noted by IMA
1. Financial reports are for external users. Managerial accounting reports are for internal users.
2. Financial accounting summarizes past transactions. Managerial accounting has a strong emphasis on the future.
3. Financial accounting data should be objective and verifiable. Managerial accounting data should be relevant.

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4. Financial accounting focuses on precision. Managerial accounting focuses on timeliness of information.

5. Financial accounting is concerned with reporting for a company as a whole. Managerial accounting focuses on
segments of a company
6. Financial accounting must conform to financial accounting reporting standards. Managerial accounting is not
bound by financial accounting standards.
7. Financial accounting is mandatory, Managerial accounting is not.

Financial Accounting vs. Cost Accounting

Financial information assists external users with business decisions centering on a variety of issues such as the

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purchase and sale of stock, issuance of loans, etc. Cost management has an internal focus. Cost management identifies,
collects, measures, classifies, and reports information that is used by managers for costing purposes, planning, controlling,
and decision making.

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Cost accounting attempts to satisfy costing objectives for both financial and management accounting. Management
accounting is concerned specifically with how cost information and other financial and nonfinancial information should be
used for planning, controlling, and decision making. Both the cost management information system and the financial

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accounting information system are part of the entire accounting information system.

1.1.3 ROLES AND ACTIVITIES OF CONTROLLER AND TREASURER

Treasurer vs. Controller
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
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2. Reporting and interpreting
3. Evaluating and consulting
4. Tax administration
5. Government reporting
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6. Protection of assets
7. Economic appraisal

Line vs. Staff Authority

Line positions in a company are those that have the responsibility and authority for achieving the major goals of
the corporation. Typically, these goals are targets for revenues and profits. Line employees are those directly involved in
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the daily operations of a business by selling or producing a product or service.

The primary purpose of staff positions in most companies is to provide assistance and specialized advice and
expertise to colleagues in line positions.
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ROLES AND ACTIVITIES OF THE MANAGERIAL ACCOUNTANT

I. Strategic Decisions
Key to a company’s success in creating value for customers while differentiating itself from its competitors The five
stages of the process:
1) Clarify Your Vision
2) Gather and Analyze Information
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3) Formulate a Strategy
4) Implement Your Strategy
5) Evaluate and Control

Mission vs Vision
A Mission Statement defines the company’s business, its objectives and its approach to reach those objectives. A
Vision Statement describes the desired future position of the company.

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Sources of Competitive Advantage

Michael Porter’s Three Generic Strategies
1. The Cost Leadership Strategy- Increasing profits by reducing costs, while charging industry-average prices.
2. The Differentiation Strategy - Differentiation involves making your products or services different from and more
attractive than those of your competitors.
3. The Focus Strategy- Companies that use Focus strategies concentrate on particular niche markets and, by
understanding the dynamics of that market and the unique needs of customers

II. Identifying and Building Resources and Capabilities

1. Strategic analysis: matching knowledge of marketplace opportunities and threats with company’s resources and

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capabilities.
2. Balance sheet information about assets
a. Current resources- this are indented to give management and idea of the company’s liquidity. This area will

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be fully discussed in Financial Management.
i. Cash adequacy
ii. Inventory management

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b. Long-term productive assets: important strategic decisions for the right investments. Long-term assets are
needed to support operating activities to sustain long-term profitability. This are capital goods needed to
produce the final product or services offered by the company.
i. Analyze trends and measure efficiencies
ii. Develop network of relationships with customers and suppliers.
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iii. Identify financial and nonfinancial costs and benefits associated with alternative choices.
c. Intangible assets- this are assets that lack physical attributes or existence but generate cash flows for the
company.
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Michael Porter's 5 Competitive Forces
The Five Forces model can help businesses boost profits, but they must continuously monitor any changes in the five
forces and adjust their business strategy.
1. Competition in the Industry- This refers to the number of competitors and their ability to offer goods or services at a
lower price than the company.
2. Potential of New Entrants into an Industry- The less time and money it cost for a competitor to enter a company's
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market and be an effective competitor, the more an established company's position could be significantly weakened.
3. Power of Suppliers- It is affected by the number of suppliers of key inputs of a good or service, how unique these inputs
are, and how much it would cost a company to switch to another supplier.
4. Power of Customers- It is affected by how many buyers or customers a company has, how significant each customer is,
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and how much it would cost a company to find new customers or markets for its output.
5. Threat of Substitutes- Substitute goods or services that can be used in place of a company's products or services pose
a threat.

BCG Growth-Share Matrix

The Boston Consulting Group (BCG) growth-share matrix is a planning tool that uses graphical representations of a
company’s products and services in an effort to help the company decide what it should keep, sell, or invest more in. It is
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divided into four quadrants:

a. Dogs (or Pets)- If a company’s product has a low market share and is at a low rate of growth, don't generate
much cash for the company since they have low market share and little to no growth.
b. Cash Cows- Products that are in low-growth areas but for which the company has a relatively large market share
are typically leading products in markets that are mature.
c. Stars- Products that are in high growth markets and that make up a sizable portion of that market, which generate
high income but also consume large amounts of company cash.

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BASIC CONSIDERATIONS IN MAS

d. Question Marks - Questionable opportunities are those in high growth rate markets but in which the company does
not maintain a large market share. They typically grow fast but consume large amounts of company resources.

III. Role in Implementing Strategy

A. Implementing strategy: managers taking action by using planning and control systems to help the collective
decisions of an organization
1. Planning- This stage involves setting the company’s specific targets for attaining long term goal.
a. Thinking process
i. Selecting organization goals
ii. Predicting results under various alternatives of achieving those goals

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iii. Deciding how to attain desired goals
b. Communicating goals and how to attain them to entire organization.
2. Control

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a. Taking actions to implement the planning decisions
b. Deciding on performance evaluation.
3. Feedback: linking planning and control to help future decision making.

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B. Supporting managers by providing information to improve strategic, planning, and control decisions
1. Three roles of management accountants for success
a. Problem solving
b. Scorekeeping

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c. Attention directing: helping managers properly focus their attention.
2. Goals to assist managers in making better decisions
a. Different decisions emphasize roles differently
i. Strategy and planning emphasize problem solving
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ii. Control emphasizes scorekeeping and attention directing
b. Interaction among types of decisions means activity/roles done simultaneously. The functions of
management overlap as it performs its duties. It is non-sequential in nature.
c. Information must be relevant and timely to be useful.

C. Enhancing the value of management accounting systems by guiding managers to focus on challenges
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1. Customer focus.
2. Value-chain and supply-chain analysis.
a. Companies add value through
i. Research and development
ii. Design of products, services, or processes
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iii. Production.
iv. Marketing.
v. Distribution.
vi. Customer service..
b. Managers in all business functions are customers of management accounting information.
3. Key success factors
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a. Cost and efficiency

b. Quality
c. Time
d. Innovation
4. Continuous improvement and benchmarking

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1.1.4 INTERNATIONAL CERTIFICATIONS IN MANAGEMENT ACCOUNTING

Certified Management Accountant (CMA) is a professional certification credential in the management accounting
and financial management fields. The certification signifies that the person possesses knowledge in the areas of financial
planning, analysis, control, decision support, and professional ethics. There are many professional bodies globally that have
management accounting professional qualifications. The main bodies that offer the CMA certification are:
a. Institute of Management Accountants USA;
b. Institute of Certified Management Accountants (Australia); and
c. Certified Management Accountants of Canada.

ETHICAL STANDARDS IN MAS

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The Code of Ethics in effect in the Philippines automatically covers all managerial accountants practicing in the
Philippines. In addition to that is the code of ethics developed by IMA. Members of IMA shall behave ethically. A commitment
to ethical professional practice includes overarching principles that express our values, and standards that guide our

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conduct. The IMA Code of Ethics is composed of two parts, the Personal Standards, and Resolution of Conflict.
PRINCIPLES
IMA’s overarching ethical principles include: Honesty, Fairness, Objectivity, and Responsibility. Members shall act

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in accordance with these principles and shall encourage others within their organizations to adhere to them.

I. STANDARDS
A member’s failure to comply with the following standards may result in disciplinary action.
a. COMPETENCE
Each member has a responsibility to: R
1. Maintain an appropriate level of professional expertise by continually developing knowledge and skills.
2. Perform professional duties in accordance with relevant laws, regulations, and technical
standards.
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3. Provide decision support information and recommendations that are accurate, clear, concise, and timely.
4. Recognize and communicate professional limitations or other constraints that would preclude
responsible judgment or successful performance of an activity.

b. CONFIDENTIALITY
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Each member has a responsibility to:

1. Keep information confidential except when disclosure is authorized or legally required.
2. Inform all relevant parties regarding appropriate use of confidential information. Monitor
subordinates’ activities to ensure compliance.
3. Refrain from using confidential information for unethical or illegal advantage.
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c. INTEGRITY
Each member has a responsibility to:
1. Mitigate actual conflicts of interest, regularly communicate with business associates to avoid
apparent conflicts of interest. Advise all parties of any potential conflicts.
2. Refrain from engaging in any conduct that would prejudice carrying out duties ethically.
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3. Abstain from engaging in or supporting any activity that might discredit the profession.

d. CREDIBILITY
Each member has a responsibility to:
1. Communicate information fairly and objectively.
2. Disclose all relevant information that could reasonably be expected to influence an intended
user’s understanding of the reports, analyses, or recommendations.
3. Disclose delays or deficiencies in information, timeliness, processing, or internal controls in
conformance with organization policy and/or applicable law.

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II. RESOLUTION OF ETHICAL CONFLICT

In applying the Standards of Ethical Professional Practice, you may encounter problems identifying unethical
behavior or resolving an ethical conflict. When faced with ethical issues, you should follow your organization's established
policies on the resolution of such conflict. If these policies do not resolve the ethical conflict, you should consider the
following courses of action:
1. Discuss the issue with your immediate supervisor except when it appears that the supervisor is involved. In that
case, present the issue to the next level. If you cannot achieve a satisfactory resolution, submit the issue to the next
management level. If your immediate superior is the chief executive officer or equivalent, the acceptable reviewing authority
may be a group such as the audit committee, executive committee, board of directors, board of trustees, or owners. Contact
with levels above the immediate superior should be initiated only with your superior's knowledge, assuming he or she is not

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involved. Communication of such problems to authorities or individuals not employed or engaged by the organization is not
considered appropriate, unless you believe there is a clear violation of the law.
2. Clarify relevant ethical issues by initiating a confidential discussion with an IMA Ethics Counselor or other impartial
advisor to obtain a better understanding of possible courses of action.

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3. Consult your own attorney as to legal obligations and rights concerning the ethical conflict.

1.1.5 GLOBAL TRENDS IN MANAGEMENT ACCOUNTING

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With the advent of new technologies and innovations around the world, the global economic environment continues
to evolve and thrive. The following are 7 trends in Management Accounting:

1. The shift to predictive accounting- There is a widening gap between what management accountants report and what
managers and employee teams want. Predictive accounting focus management reports on what is expected to happen
rather than on what happened in the past.
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2. Business analytics imbedded in Enterprise Performance Management methods - Business analytics and Big Data
are here to stay because complexity, uncertainty, and volatility are on the rise. The need for analytics may be the only
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sustainable long-term competitive advantage
There are three primary methods of business analysis:
1. Descriptive
2. Predictive
3. Prescriptive
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Benefits of Business Analytics

1. More Informed Decision-Making
2. Greater Revenue
3. Improved Operational Efficiency
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3. Managing Information Technology and Shared Services as a Business - The substantial growth in IT over the past
decade has moved it from a back-office support function to a critical and strategic function. Information Technology
Management is the process whereby all resources related to information technology are managed according to an
organization's priorities and needs.

Shared Services is the consolidation of business operations that are used by multiple parts of the same
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organization. It is a common operational strategy designed reduce costs by eliminating repetition of effort.

4. Expansion from product to channel and customer profitability analysis- A product-driven environment involves
the business developing a product first, then searching for a market for it.. On the other hand, a customer-driven
environment involves the business actively gathering information on its customers, and subsequently develops a product
based on the information gathered.

5. Co-existing and improved management accounting methods - Modern organizations are increasingly becoming
more complex due to rapidly changing and highly competitive environment. Globalization, economic liberalization,

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technological advancements and interconnectivity have made the existence of organizations tougher than ever before.
These factors were some of the drivers that lead to a change in management accounting.

The International Federation of Accountants identified four stages in which management accounting has evolved:
Stage 1 – Prior to 1950, the focus was on cost determination and financial control
Stage 2 – By 1965, the focus had shifted to the provision of information for management planning and control
Stage 3 – By 1985, attention was focused on the reduction of waste in resources used in business processes
Stage 4 – By 1995, attention had shifted to the generation or creation of value

Three categories of Factors in Change of Management Accounting

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a. External
b. Internal
c. Organizational

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6. Management accounting’s expanding role with Enterprise Performance Management (EPM) - EPM is a
process and a methodology designed to enhance the company’s performance and enable management to better respond
to presented challenges as well as opportunities on a project.

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4 main themes of EPM
a. Target setting- Entails of having a tight alignment between a business strategy and the KPI’s used to set goals
as well as benchmarks.
b. Integrated business planning- This prompts the execution of business strategy while forecasting and predicting
future results with confidence and agility.
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c. Performance measurement & reporting (PMR)- This is the process of collecting and validating performance
information to reveal what’s really happening and provide insight to support agile and confident decision making.
d. Analytics- Testing strategic decisions and discovering patterns or trends based upon the huge sets of data
available through measurement and reporting efforts or from external sources.
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7. The need for better skills and competency with behavioral change management - Trend number 7 requires
change agent management accountants to motivate mid-level managers and other “champions” to demonstrate to their
co- workers that progressive management accounting and EPM methodologies make sense to implement. Change
management is a process that helps ease any organizational transitions.
5 roles that managers and supervisors must play in times of change:
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a. Communicator About the Change

b. Advocate for the Change
c. Coached for Employees
d. Liaison to the Project Team
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e. Resistance Manager

DRILLS
1. It could be argued that the reason a company has succeeded in a very competitive market while its rivals have failed is
because:
A. The strategies that the successful company pursues have a strong impact on its performance relative to its rivals.
B. The successful company has adopted more steps to its formal strategic planning process.
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C. The company has evolved into a multi-divisional organization.

D. The company has adopted a strategy with a low propensity for risk-taking.

2. Which of the following is not a significant reason for planning in an organization?

A. Forcing managers to consider expected future trends and conditions.
B. Developing a basis for controlling operations.
C. Enabling selection of personnel for open positions.
D. Promoting coordination among operation units.

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3. One of the key sources of competitive advantage is:

A. Slow adoption of more efficient business practices.
B. Responsiveness to customer needs.
C. Maintaining average quality.
D. Taking advantage of, and being a follower in, competitors' product innovation.

4. According to the BCG Growth-Share Matrix, all of the following are included in product life-cycle strategies except:
A. Increase investment in the product to maximize market share.
B. Aggressive pricing to increase market share quickly.
C. Superior responsiveness to customers.
D. "Milking" the product

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5. Strategic managers use different business-level strategies to put the company's business model into action. Business-
level strategies include all of the following except

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A. How to improve the product attributes, the service attributes and personnel attributes associated with the company's
product.
B. How and where to invest the company's capital in ways that will result in competitive advantage.

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C. How much to differentiate and how to price the company's product or service.
D. What products should be offered and to which customer groups (market segments).

6. The method(s) that managers employ to attain one or more of the organization's goals can be defined as:
A. Choosing the company's organizational structure.
B. Strategy.
C. Determining the company's business model.
D. Capital investments.
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7. Companies group customers in order to gain a competitive advantage. This is called:
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A. Market segmentation.
B. Positioning.
C. Customer differentiation.
D. Product differentiation.

8. When the organization develops a plan or plans to prepare for future, often unpredictable events, it is called:
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A. Contingency planning.
B. Short-term business planning.
C. Long-term business planning.
D. Capital budgeting.
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9. The sources of a company's distinctive competencies are:

A. The company's resources and capabilities.
B. The company's threats and opportunities.
C. The company's prior strategic commitments.
D. High profitability and sustained profit growth.
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10. Pro forma financial statements are used within a company for various purposes. They are not used for
A. determining whether the company will be in compliance with required covenants on its long-term debt.
B. comparison with actual results for performance reporting in order to determine employee bonuses.
C. "what if" analysis, to forecast the effect of a proposed change.
D. determining the company's future needs for external financing.

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11. A company's mission statement is, above all, intended to define:

A. The weaknesses of the firm.
B. The specific actions that the company should take.
C. Why the company exists, or its "reason to be."
D. The company's profit objectives.

12. All of the following are characteristics of the strategic planning process except the
A. Analysis of external economic factors.
B. Analysis and review of departmental budgets.
C. Emphasis on the long run.

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D. Review of the attributes and behavior of the organization's competition

13. Michael Porter's Five Forces Model helps managers to analyze forces that shape competition within an industry in

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order to identify opportunities and threats in their industry environments. Which of the following forces is not one of the
Five Forces?
A. Risk of entry by potential competitors.
B. The bargaining power of competitors.

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C. The closeness of substitutes to a company's products.
D. The bargaining power of suppliers.

14. Which of the following is not a characteristic of a tactical plan:

A. It is quantitative in focus.
B. It covers a period of time one year to five years. R
C. It relates to production, materials requirements, inventory, cash flows and income statements.
D. Top management is responsible for development and overall implementation.
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15. The four factors that derive from a company's distinctive competencies and which create competitive advantage are
A. continuous improvement, continuous learning, prior strategic commitments and absorptive capacity.
B. superior efficiency, quality, innovation, and customer responsiveness.
C. employee productivity, capital productivity, product innovation and process innovation.
D. the value (utility) customers place on the company's products, the price it charges for its products, the costs of creating
those products, and the profitability of the company.
C

16. Michael Porter of Harvard University has set forth three generic strategies for companies. Which of the following is not
one of those strategies?
A. Focus, or competitive scope.
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B. Cost leadership.
C. Differentiation.
D. Innovation.

17. Strategy is a broad term that usually means the selection of overall objectives. Strategic analysis ordinarily excludes
the
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A. Target product mix and production schedule to be maintained during the year.
B. Best ways to invest in research, design, production, distribution, marketing, and administrative activities.
C. Trends that will affect the entity's markets.
D. Forms of organizational structure that would best serve the entity.

18. An organization is said to have a "competitive advantage" over its industry rivals when:
A. It can distribute its product more quickly than other industry competitors.
B. It spends more money on advertising than its competitors do.
C. Its distribution channels are wider than others in its industry.
D. The profitability of the company is greater than that of the average profitability for all other organizations in its industry.

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19. To avoid failure, a company must maintain a constant focus on all of the following except:
A. The nature of the organization's previous strategy and strategic commitments.
B. Continuous improvement and learning.
C. Identification and adoption of the best industrial practices.
D. The foundation and practices of competitive advantage.

20. The plan that describes the long-term position, goals, and objectives of an entity within its environment is the
A. Strategic plan.
B. Capital budget.
C. Cash management budget.

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D. Operating budget.

21. Management accounting focuses primarily on providing data for:

A. internal uses by managers.

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B. external uses by stockholders and creditors.
C. external uses by the Internal Revenue Service.
D. external uses by the Securities and Exchange Commission.

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22. Managerial accounting:
A. is more future oriented than financial accounting.
B. tends to summarize information more than financial accounting
C. is primarily concerned with providing information to external users.
D. is more concerned with precision than timeliness.
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23. Compared to financial accounting, managerial accounting places more emphasis on:
A. the flexibility of information.
B. the precision of information.
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C. the verifiability of information.
D. the consistency of information

24. The function of management that compares planned results to actual results is known as:
A. planning.
B. directing and motivating.
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C. controlling.
D. decision making.

25. Which of the functions of management involves overseeing day-to-day activities?

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A. Planning
B. Directing and motivating
C. Controlling
D. Decision making

26. Which of the following is not one of the three basic activities of a manager?
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A. Planning
B. Controlling
C. Directing and motivating
D. Compiling management accounting reports

27. The delegation of decision making to lower levels in an organization is known as:
A. the planning and control cycle.
B. controlling.
C. decentralization.
D. scorekeeping

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28. Which of the following statements are false concerning line and staff functions?
I. Persons occupying staff functions have authority over persons occupying line functions.
II. Both line and staff functions are depicted on the organization chart.
III. Line functions are directly related to the basic objectives of an organization.

A. Only I
B. Only II
C. Only I and II
D. I, II, and III

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29. Which of following would normally be found on a manufacturing company's organization chart?
A. the layout of the factory assembly lines
B. a list of the materials needed to produce each of the company's products

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C. the informal lines of reporting and communication
D. levels of authority and responsibility

30. For a hospital, what type of position (line or staff) is each of the following?

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Emergency Room Manager Human Resources (Personnel) Manager
A. Staff Staff
B. Staff Line
C. Line Staff
D. Line

31. A detailed financial plan for the future is known as a:

A. budget.
B. performance report.
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Line
PA
C. organization chart.
D. segment.

32. A performance report is:

A. a detailed report comparing budgeted data to actual data for a specific time period.
B. a formal statement of plans for the upcoming period.
C

C. required to be filed monthly by the Securities and Exchange Commission.

D. not used in decentralized organizations.

33. The Standards of Ethical Conduct for Management Accountants developed by the Institute of Management
EO

Accountants contain a policy regarding confidentiality that requires management accountants to refrain from disclosing
confidential information acquired in the course of their work:
A. except when authorized by management.
B. in all situations.
C. except when authorized by management, unless legally obligated to do so.
D. in all cases not prohibited by law.
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34. Wide-spread adherence to ethical standards in an advanced market economy tends to result in all of the following
except:
A. higher prices.
B. higher quality goods and services.
C. greater variety of goods and services available for sale.
D. safer products.

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BASIC CONSIDERATIONS IN MAS

35. The Institute of Management Accountants (IMA) has developed ethical standards for management accountants. What
four categories has the IMA classified these standards into?
A. Honesty, Fairness, Objectivity, and Responsibility
B. Objectivity, Integrity, Commitment, and Confidentiality
C. Observation, Integrity, Closure, and Competence
D. Competence, Credibility, Integrity, and Confidentiality

36. Samantha Galloway is a managerial accountant in the accounting department of Mustang Industries, Inc. Samantha
has just discovered evidence that some of the corporation's marketing managers have been wrongfully inflating their
expense reports in order to obtain higher reimbursements from the firm. According to the Institute of Management

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Accountants' Standards of Ethical Conduct, what should Samantha do upon discovering this evidence?
A. notify the controller.
B. notify the marketing managers involved.
C. notify the president of the corporation.

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D. ignore the evidence because she is not part of the Marketing Department.

37. The organizational group that advises or performs technical functions of an enterprise is the:

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A. line
B. function
C. team
D. staff

A. Tax
B. Controller's
C. Cost
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38. The department that has the responsibility for the financial administration of a company is:
PA
D. Treasury

39. In an attempt to resolve an ethical conflict in a publicly-held corporation, if the accountant has unsuccessfully gone to
the board of directors, the next step is to:
A. go to the company president
B. go back to middle management to garner support
C

C. report the problem to the SEC

D. resign

40. An organizational concept recognizing that all positions or functional divisions can be categorized into two groups is:
EO

A. functional-teamwork concept
B. processes function
C. line-staff concept
D. matching concept

41. In an attempt to resolve an ethical conflict when the immediate superior is involved, an accountant should first:
A. go to the next higher level of management
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B. report the problem to the SEC

C. resign
D. go to the company president

42. Management services of certified public accountants cover all of the following except:
A. Project feasibility studies
B. Systems design, development and implementation
C. Organizational development and planning
D. Audit, tax and legal services

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BASIC CONSIDERATIONS IN MAS

43. Which of the following is not a characteristic of "Staff" authority?

A. It gives support, advice, and service to line managers
B. It is exercised laterally or upward
C. It has the authority to command action or give orders to subordinates
D. It is depicted as part of the organizational chart

44. Which of the following is not a Controller's function?

A. In charge of planning and control
B. Protection of assets such as adequate insurance coverage, etc.
C. Interpreting and reporting on effects of external factors on the business
D. Arranging short-term financing

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45. Controllers are ordinarily not concerned with
A. Preparation of tax returns

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B. Reporting to government
C. Protection of assets
D. Investor relations

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46. The treasury function is usually not concerned with
A. Financial reporting
B. Short-term financing
C. Cash custody and banking
D. Credit extension and collection of bad debts
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47. A letter written by the CPA and constitutes the CPA’s understanding of the work to be done in an MAS engagement is
A. Representation letter
B. Management letter
PA
C. Letter of proposal
D. Comfort letter

48. The most important factor in selecting an engagement team is to assign consultants:
A. With prior experience in the client's industry.
B. With a combination of skills and experience in various business function areas as well as in different industries.
C

C. With the appropriate skills and experience and types of thinking to deal with the client's problems.
D. Who are likely to employ different approaches to problem solving such as highly imaginative thinking, or unusual skill in
the interpretation and use of financial and statistical data.
EO

49. It is one of the objectives of a final report

A. Recommend a future course of action, including, where appropriate, a listing of future projects in priority sequence
B. Agree on the role to be performed by the CPA consultant
C. To secure acceptance of the result of the study
D. Agree on the role to be performed by the CPA consultant

50. The primary purpose of management advisory services is

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A. To conduct special studies, preparation of recommendation, development of plans and programs, and
provisions of advice and assistance in their implementation
B. To provide service or to fulfill some social need
C. To improve the client's use of its capabilities and resources to achieve the objective of the organization
D. To earn the best rate or return on resources entrusted to its care with safety of investment being taken into account
and consistent with the firm's social and legal responsibilities

--- END OF HANDOUTS ---

REO CPA REVIEW PHILIPPINES Effectiveness. Efficiency. Convenience

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