CHAPTER 1

OVERVIEW OF MANAGEMENT CONSULTANCY SERVICES BY CPAs

LEARNING OBJECTIVES
• Discuss the evolution, trends and prospects of management
consulting services.
• Understand the consulting industry and career structure in consulting
firms.
• Describe the nature of Management Advisory Services by
independent accounting firms.
• Distinguish between consultations and engagements.
• Explain the rationale for using management consultants.
• Discuss the CPAs role and objective in an MAS engagement.
Introduction to the World of Consulting
Who is a Consultant?

• A consultant is someone who has expertise in a specific area or

areas and offers unbiased opinion and advice for a fee.
• Rendered exclusively on the interest of the client
• Review, analysis, recommendation and implementation
• Independent contractor (self employed)
• Someone who is paid for his/her unique expertise or advice –
he/she is acting as a consultant
How to be become a successful consultant?
• Expertise
• Incentive or motivation for one to “want” to consult
for others
Who are the people who go into consulting?
• People frustrated with their current careers, who see the solutions for
problems but are unable to effectively influence decision-makers
• People who want a stimulating, dynamic, growing career that satisfies the
need for personal development
• People dissatisfied with the lack of challenge, opportunity, or creativity in
their existing jobs
• People graduating from school with training but little experience who wish to
work for a large consulting firm
• People who are between jobs and seeking new opportunities and careers
Who are the people who go into consulting?
• People who see that they may be laid off and wish to establish themselves in
a business to earn a livelihood; those people may start on a part-time basis
while still employed
• Retired people who have expertise and wisdom to offer
• People who wish to supplement their present income by using their
managerial expertise or technical and academic skills
• People with work experience and industry knowledge or other skills who want
to combine a family life with work at home
• People who understand government operations and the contract process or
who have built up contracts in government, politics, or industry over the years
Why is there an increase demand for
consultants?
• Skilled consultants can be brought into an organization on short
notice.
• No need to pay high salary and provide them with the benefits
and even retirement plan.
Nonmonetary reasons people enter the
consulting field:
• Sharing their knowledge to help their clients.
• Building business network and take a step up in one’s corporate
career.
• Having no boss, being independent and making their own decisions.
• No fear of being laid off.
• Having a flexible source of income.
• A means of giving back to the community by providing expertise and
assistance in community based projects.
 EVOLUTION OF MAS IN CPA FIRMS

Auditing, Accounting
CPA firms discovered Auditors make
System Design &
problems in client’s suggestions for
Installation, &
business corrective action
Income Tax Work

Public accounting firms

Client engaged the CPA CPA will recommend
found themselves
to make a thorough new policies and
becoming more
investigation of the procedures needed for
involved in ManCon
problem a solution
Work
Management Advisory Service Divisions
• Industrial Engineers, Lawyers, Statisticians, Psychologists as well as
accountants

Management Consultants
• Special training and experience, skills and research capabilities to apply an
analytical approach to the solution of management problems.
Independence
• Regulatory agencies such as the SEC, the Board of Accountancy
through the promulgated Code of Ethics specifically prohibit the CPAs
from performing certain consultancy services to their external audit
clients.
• Provide ONLY advice and technical assistance
INDEPENDENT ACCOUNTING FIRM’S ROLE IN
MAS
“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.”
CPA’s OBJECTIVE IN ENGAGING IN MAS
“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”
1. Technical Competence
2. Familiarity with the client’s finance and control systems
and his business problems
3. Analytical ability and experience in problem solution
4. Professional independence, objectivity and integrity
NATURE OF MAS BY INDEPENDENT
ACCOUNTING FIRMS
Management Advisory Services
• Can be described as 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.

Management Consulting
• An Independent and objective advisory service provided by qualified
persons to clients in order to help them identify and analyze
management problems or opportunities
Two types of encounters with clients:
• Consultation
• Normally consist of providing advice and information during a short time frame.
• This advice and/or information is provided orally during one or more discussions with
the client.
• Engagement
• Consist of the form of management advisory or consulting service in which analytical
approach and process is applied in a study project.
• Ascertaining the pertinent facts and circumstances
• Seeking and identifying objectives
• Defining the problem or opportunity for improvement
• Evaluating and determining possible solutions
• Presenting findings and recommendations, and
• Implementing the solution, if appropriate
If client’s decision is to proceed, the independent
accounting firm may also be involved in:
• Planning and scheduling actions to achieve the desired results
• Advising and providing technical assistance in implementing
RATIONALE FOR USING MANAGEMENT
CONSULTANTS

• Independent viewpoint
• Professional advisor and counselor
• Temporary professional service
• Agent of change
THE CONSULTING INDUSTRY
• Information Technology
• Consulting and system integration
• Corporate Strategy
• Operations Management
• Human Resources Management
• Outsourcing
Types of Consultancy Firms
• IT Firms
• Accounting Firms Offering Consultancy
• Major Consulting Only Firms
• Independents
Career Structure in Consulting Firms
• Analysts
• Consultants
• Senior Consultants or Managers
• Business Development Managers
• Directors (or Partners)