Mindanao State University
College of Business Administration and Accountancy
DEPARTMENT OF ACCOUNTANCY
Marawi City
MANAGEMENT ADVISORY SERVICES CONCEPTS, STANDARDS AND PRACTICES
Accounting 142
MANAGEMENT ADVISORY SERVICES – refers to the area of
accounting work concerned with providing advice and
technical assistance to help clients improve the use of their
sources to achieve their goals.
MANAGEMENT ADVISOR OR CONSULTANT – a person who is
qualified by education, experience, technical ability and
temperament to advise or assist businessmen on a
professional basis in identifying, defining and solving
specific management problems involving the organization,
planning, direction, control and operation of the firm.
C. Introducing new ideas, concepts and methods to
management.
D. Conducting special studies, proposing plans and
programs and providing guidance and technical
assistance in their implementation.
BROAD AREAS OF MANAGEMENT ADVISORY SERVICES
A. Finance and accounting:


FACTORS FOR THE EMERGENCE AND GROWTH OF MAS
CONSULTANCY
A.
B.
Growth in size and complexity of business firms.
Complexities in managing and conducting a
business.
C. Lack of competent staff.
D. Trend towards industrialization.
E. Need for adequate and timely information in
management decision making.
F. Development of techniques for the solution of
management
problems
and
businessmen‟s
awareness of their usefulness.

B.
Non-finance and accounting:

REASONS FOR HIRING MANAGEMENT CONSULTANTS
A.
Help define specific problems and develop
solutions.
B. Provide specialized skills and experience.
C. Provide confidential service in which the identity of
the client is concealed.
D. Train client personnel.
E. Help improve inter-company communications.
F. Render an independent opinion.
G. Help get results.


MAS BY CPAs – CPAs performing management consulting
and other advisory services are considered in the practice
of professional accounting and are bound by the Code of
Ethics for Professional Accountants. CPAs enjoy an
advantage over other professionals in MAS practice
because:
A. They are already familiar with the client and his
business, thus, enjoy the client‟s confidence.
B. They are members of a profession with recognized
standing and are equipped with technical knowhow in accounting and taxation.
MAS practice actually stemmed from the CPA‟s audit
practice.
CHARACTERISTICS OF MANAGEMENT ADVISORY SERVICES
A.
Services are rendered for the management rather
than for third parties.
B. Involves problem solving.
C. Relates to the future.
D. Involves varied assignments.
E. Engagements are usually non-recurring.
F. Engagements require highly qualified staff.
G. Human relations play a vital role in each
engagement.
SCOPE OF MANAGEMENT ADVISORY SERVICES
MAS are usually related to the services rendered by CPAs in
the areas of auditing, tax and accounting and may involve
activities such as:
A. Counseling management in its analysis, planning,
organizing and controlling functions.
B. Reviewing and suggesting improvement in policies,
procedures, systems, methods and organizational
relationships.
Financial accounting – financial accounting
systems design and development.
Management accounting – establishment of
budgetary controls, cost analysis and control
and
variance
analysis,
design
and
development of management accounting
systems design and development.
Financial management – establishment of
capital budgeting procedures, study of cost
of capital and financial structures and
establishment of operating and cash
budgets.



General management – management of
operations audit, measurement of operating
performance, merger and acquisition studies
and long-range planning.
Project feasibility studies – preparation of
business plan and preparation of project
feasibility study including evaluation of the
study‟s assumptions and major aspects.
Organization and personnel – job evaluation
and salary administration, studies of office
cost reduction systems, determining cost of
alternative
in
collective
bargaining
alternatives and preparation of organization
and administrative manual.
Industrial engineering – development of work
standards, plant layout studies, production
planning, scheduling and control and
inventory management studies.
Marketing – market forecasting, distribution
cost analysis, product profitability analysis
and pricing policy and determination.
Operating research – use of quantitative
techniques such as PERT, queuing theory,
regression analysis in solving operational
problems.
MAS CLASSIFICATION BASED ON REQUIRED EXPERTISE
A. Usual services – those that can be offered readily
by the practitioner based on his basic training and
background.
B.
Somewhat specialized services – those that require
an extension of the usual accounting work and
require additional training and/or experience.
C. Highly specialized services – those that require
special skills, aptitude and training which CPAs do
not normally possess.
ANALYTICAL APPROACH AND PROCESS
The analytical approach and process refers to the
systematic, objective and rational method of solving
organizational problems. It involves a professional-level
ability to find facts and define problems, to structure
problems so that attention is focused on fundamentals
rather than on symptoms and fringe issues, to find and shift
alternative solutions and to adopt general or theoretical
solutions to fit particular situations in a particular way.
A. Analysis Stage:



B.
Ascertaining
the
pertinent
fact
and
circumstances.
Seeking and identifying objectives.
Defining the problem or opportunity for
improvement.

Design Stage:


Evaluating
and
determining
possible
solutions.
Presenting findings and recommendations.
B.
C. Implementation Stage:


Planning and scheduling actions.
Advising and providing technical assistance
in implementing.
ROLE OF CONSULTANTS IN MAS ENGAGEMENTS
A. Full Scope Engagements – these cover all the
seven phases in the analytical process.
CONSULTANT – limited to that of an advisor; in the
implementation stage, his role is merely to provide
technical assistance.
B.
Special Study Engagements – the client seeks only
an impartial and objective study of a case and the
resulting recommendations which involves only the
first five stages in the analytical process.
CONSULTANT – to proceed through the first five
phases of the analytical process, apply objective
judgment to the facts and present findings and
recommendations to the client for decision and
further action.
CLIENT – to supply pertinent information and to
make the decision on the case. Any action beyond
the point of decision is solely the responsibility of the
client.
C. Informal Advice – its structure is informal and no
presumption should exist that an extensive study
has been performed.
CONSULTANT – to respond as practicable at the
moment and express the basis for the response.
DETERMINATION OF SCOPE OF SERVICE
In determining the scope or type of engagement, the
consultant should consider the following guidelines:
A. Responsibility to establish scope of services.
B. Independence.
C. Competence.
D. Requirements for specialization.
E. Attention to client‟s basic problems.
F. Referral arrangements.
G. Code of Ethics for Professional Accountants.
MAS ENGAGEMENT PROCESS – the phases below constitute
the specific activities involved in MAS engagement cycle:
A. Negotiating the engagement – involves preliminary
discussions with the appropriate official of the
prospective client to ascertain whether or not the
engagement may be pursued and come up with
the
common
understanding
about
such
engagement.

Problem definition which could include
review of the background materials about
the prospective client and preliminary
surveys of the client-firm‟s situation.
a. Overt symptoms.
b. Covert symptoms.

Determination of the engagement‟s
nature, scope and objectives.

Agreeing on the basis for establishing and
billing fees. The general rule is that “the
costs of consultancy service shall be
computed based on the consultant‟s
actual services plus a reasonable level of
management.”
a. Per diem basis.
b. Bracket quotation basis.
c. Lump sum basis.
d. Retainer basis.
Confirmation of the understanding
writing.
a. Proposal letter.
b. Confirmation letter.
c. Engagement letter.
d. Contract.
e. File memorandum.
in
Preparing and starting for the engagement – to
ensure that the engagement will be completed
effectively and efficiently, the practitioner should
carefully plan and prepare for the engagement.

Selecting and briefing engagement team
members.

Preparing the engagement plan and work
program.
a. The engagement plan translates
the problem definition into steps
required to attain the objectives of
the proposed project.
b. The engagement work program is
considered as the master plan for
the engagement which serves as
a framework for controlling its
progress. It documents how the
engagement will be carried out,
organizes the engagement into
scheduled and logical sequences
and indicates the various tasks
necessary
to
achieve
the
objectives of the engagement.
C. Conducting the engagement – after carefully and
thoroughly preparing for the engagement, the
practitioner and the team members may proceed
to conduct the same.

Information gathering.
a. Determining the nature and extent
of information to be collected.
b. Locating the sources of the
needed information.
c. Recording
information
and
documenting the process.

Information analysis.
a. Classifying information gathered.
b. Determining causal relationships.
c. Identifying key variables.
d. Discovering opportunities and/or
problems.
e. Developing and evaluating various
courses of actions.
f. Recommending a course of action.

Interim communications.
Working papers are to be used to document data
gathering and analysis.
D.
Preparing and presenting the reports – the final
report may be written, oral or both. The best
approach is either issue a written report and
supplement it with oral presentation or make an
oral presentation and supplement it with a written
report. Written reports could either be in long form
or in short form.

Principal findings.

Conclusions.

Recommendations.

Major facts and assumptions.

Limitations.

Reservations and other qualifications.

Other results of the engagements.
E.
Implementing the recommendations – when the
scope of the engagement covers the consultant‟s
assistance in implementing the recommendations,
the practitioner should undertake this activity
without impairing his independence bearing in
mind his appropriate role as a mere advisor or
consultant.

Client understanding.

Client decision.

Client expertise.

Client ability to maintain the new set-up.
F. Evaluating the engagement – a MAS engagement
is evaluated by comparing actual results with
established standards to assess the quality of the
engagement. This activity should be undertaken in
the course of conducting the engagement and at
the conclusion of the work. Basically, the
practitioner should evaluate engagements in
accordance with the following criteria:

Achievement
of
the
engagement„s
objectives as set forth and agreed
between the client and the practitioner.

Complete satisfaction of the client
company as regards the results of the
engagement.
G. Post-engagement follow up – the practitioner
should conduct follow-up visits and evaluations
after a sufficient amount of time has passed from
the time of implementation to check and correct
any deficiencies or misunderstanding or make
necessary modifications or improvements.
MAS STANDARDS – a CPA is guided by standards in the
performance of his professional practice, including that of
MAS. A professional is guided by moral standards, ethical
standards (such as the Code of Ethics for Professional
Accountants), legal standards (such as the Constitution
and the Accountancy Act of 2004) and technical
standards.
MAS PRACTICE STANDARDS – the AICPA‟s Management
Advisory Division have promulgated 8 MAS Practice
Standards. The first 3 are general standards that set the
personal qualification for the practitioner and his
orientation in the professional practice. The last five
standards establish the practitioners‟ relationship with his
client and his attitude towards work.
PRACTICE STANDARD 1.
Personal Characteristics. In performing MAS, a
practitioner must act with integrity and objectivity and
be independent in mental attitude.
PRACTICE STANDARD 2.
Competence. Engagements are to be performed by a
practitioner having competence in the analytical
approach and process and in the technical subject
matter under consideration.
PRACTICE STANDARD 3.
Due Care. Due professional care is to be exercised in
the performance of the MAS engagements.
PRACTICE STANDARD 4.
Client Benefit. Before accepting an engagement, a
practitioner is to notify the client of any reservations he
has regarding anticipated benefits.
PRACTICE STANDARD 5.
Understanding with the Client. Before undertaking an
engagement, a practitioner is to inform the client of all
significant matters relating to the engagement.
PRACTICE STANDARD 6.
Planning, Supervision and Control. Engagements are to
be adequately planned, supervised and controlled.
PRACTICE STANDARD 7.
Sufficient Relevant Data. Sufficient relevant data is to
be obtained, documented and evaluated in
developing conclusions and communications.
PRACTICE STANDARD 8.
Communication of Results. All significant matters
relating to the result of the engagement are to be
communicated to the client.