Page 1 of 6 | MANAGEMENT ADVISORY SERVICES Handouts No. 01 BASIC CONSIDERATIONS IN MAS RHAD VIC F. ESTOQUE, CPA, MBA, CAT, MICB, RCA, CMA Basic Considerations in Management Advisory Services RHAD VIC F. ESTOQUE, CPA MBA, CAT, MICB, RCA, CMA Exercises 1. The primary purpose of management advisory services is 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 2. That kind of accounting concerned with providing information to management in making decisions about the operations of the business a. Responsibility accounting b. Cost accounting c. Management accounting d. Financial accounting 3. Which of the following is not a characteristic of MAS? a. MAS is broad in scope b. MAS involves problem-solving affecting the future operations of the client c. Beneficiary of service is management d. MAS is repetitive as far as the same client is concerned 4. The following characterize management advisory services except a. Involve decision for the future b. Broader in scope and varied in nature c .Utilize more junior staff than senior members of the firm d. Relate to specific problems where expert help is required 5. Management accounting a. Is governed by GAAP b. Draws from disciplines other than accounting c. Is geared primarily to the past rather than the future d. Places more emphasis on precision of data compared with financial accounting that does not 6. In financial accounting, certain rules and regulations must be followed on how financial statements must be presented to the reader. In managerial accounting, no such restrictions generally apply because it is: a. An entirely different field that need not observe the broad guidelines in financial accounting b. Designed to provide management with non-financial information for decision-making. c. Designed to provide accounting and other financial data to assist management in making business decisions. d. A discipline that does not require preparation of financial statements 7. The following characteristics refer to Financial Accounting except a. Provides information to external users b. Emphasizes on objective data c. Has no externally imposed standards d. Generate general-purpose financial statements REO UNDERGRAD REVIEW www.reocpareview.ph (074) 665 6774/0916 840 0661 Be accelerated above the rest with REO BASICS REAL EXCELLENCE ONLINE CPA REVIEW handouts@reocpareview.ph Page 2 of 6 | MANAGEMENT ADVISORY SERVICES Handouts No. 01 RHAD VIC F. ESTOQUE, CPA, MBA, CAT, MICB, RCA, CMA BASIC CONSIDERATIONS IN MAS 8. Managerial accounting differs from financial accounting in that financial accounting is a. More oriented toward the future b. Primarily concerned with external financial reporting c. Concerned with non-quantitative information d. Heavily involved with decision analysis and implementation of decisions 9. To distinguish between management accounting and financial accounting, the following statements are correct except a. Management accounting, in view of its various integrated recipients should have a separate data recording and retrieval system from financial accounting b. Financial accounting is bound to GAAP, and management accounting need not be in conformity with GAAP c. Financial accounting can be regarded as the process while management accounting can be regarded as the product of that process d. Management accounting output must be released on time so as not to erode its usefulness financial account output can still be useful even when delayed 10. The basic accounting records that are used to provide data for external financial reporting are also employed in management accounting. In combining and reporting these data to management, however, the accountant can relax the verifiability constraint necessary in public financial reporting and instead prepare data, which, although not adequately verifiable for external reporting, are more useful to management. This principle of management accounting considers the following factors more important than others. a. Verifiability, objectivity and accuracy b. Conservatism c. Relevance, flexibility and timeliness d. Consistency and disclosure 11. The function of management that compares planned results against actual results is known as a. Planning b. Directing and motivating c. Controlling d. Decision making 12. The activities in a management system's control process can be grouped into four (1) Measurement of actual performance (2) Deciding and implementing corrective action (3) Determining standards of performance (4) Comparing actual performance versus standards and analyzing results The above steps must be done in this sequence a. 4, 3, 2, 1 b. 3, 1, 4, 2 c. 1, 3, 4, 2 d. 3, 4, 1, 2 13. Which of the functions of management involves overseeing day-to-day activities? a. Planning b. Directing and motivating c. Controlling d. Decision making REO UNDERGRAD REVIEW www.reocpareview.ph (074) 665 6774/0916 840 0661 Be accelerated above the rest with REO BASICS REAL EXCELLENCE ONLINE CPA REVIEW handouts@reocpareview.ph Page 3 of 6 | MANAGEMENT ADVISORY SERVICES Handouts No. 01 RHAD VIC F. ESTOQUE, CPA, MBA, CAT, MICB, RCA, CMA BASIC CONSIDERATIONS IN MAS 14. People who make information-based decisions go through a series of fundamental steps in their decision-making process 1. Evaluate alternatives 2. Identify constraints 3. Set objectives 4. Gather appropriate information 5. Choose the most acceptable alternative 6. Identify alternatives The most desirable sequence in the above steps is a. 4, 2, 3, 6, 1, 5 c. 3, 2, 4, 6, 1, 5 b. 2, 3, 4, 6, 1, 5 d. 3, 2, 4, 5, 1, 6 15. Which of the following types of management services is not directly related to accounting and finance functions? a. Cost analysis of major investment decisions b. Long-range planning c. Design, installation or review of the budgetary system d. Valuation of capital stock of companies for purposes of merger or sale. 16. Which of the following types of management services is normally related to accounting and finance? a. Management audit b. Marketing forecasts c. Costs determination of alternatives in collective bargaining agreements. d. Job evaluation and salary administration. 17. 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 18. 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 19. 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 20. Controllers are ordinarily not concerned with a. Preparation of tax returns b. Reporting to government c. Protection of assets d. Investor relations 21. 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 REO UNDERGRAD REVIEW www.reocpareview.ph (074) 665 6774/0916 840 0661 Be accelerated above the rest with REO BASICS REAL EXCELLENCE ONLINE CPA REVIEW handouts@reocpareview.ph Page 4 of 6 | MANAGEMENT ADVISORY SERVICES Handouts No. 01 RHAD VIC F. ESTOQUE, CPA, MBA, CAT, MICB, RCA, CMA BASIC CONSIDERATIONS IN MAS 22. As businesses increase in complexity, the function of controllership has attained top-level recognition in the corporate arena. Many areas related to finance and accounting has been identified with controllership. One area that becomes controversial when included under the controller and viewed that such inclusion violates basic internal control is a. Credit and collection b. Internal auditing c. Long range financial planning d. Taxation and reporting to government agencies 23. The chief management accountant called “controller" traditionally perform these functions except a. The establishment and implementation of the financial planning process b. Financial and management reporting and interpretation c. Protection of company resources and economic evaluation d. Preparation of proposals for product promotions 24. Controllership has attained special recognition in corporate management as business expands in complexity and reach, and as the controller exerts influence for management to take organization’s goals. Controllership and treasurership constitute corporate finance. These are among the controller’s traditional functions: 1. Tax management 2. Financial reporting and interpretation 3. Credit management 4. Sourcing and investing funds 5. Reporting to government regulatory agencies 6. Risk management 7. Economic appraisal 8. Planning for control a. All eight items b. Items 1, 2, 5, 7, and 8 only c. Items 1, 2, 3, 4, 5, 7, and 8 only d. Items 2, 3, 5, 7, and 8 only 25. Which of the following is not a qualification of a CPA in MAS practice? a. Familiarity with the client's financial accounting and internal control systems b. Analytical experience in problem solving c. Professional independence, objectivity, and integrity d. Auditor of the client 26. CPA’s in MAS practice must observe the ethical requirements of the accountancy profession except a. independence b. expression of opinion c. incompatible occupation d. integrity and objectivity 27. Integrity is an ethical requirement for all financial managers/management accountants. One aspect of integrity requires a. Performance of professional duties in accordance with applicable laws b. Avoidance of conflict of interest c. Refraining from improper use of inside information d. Maintenance of an appropriate level of professional competence 28. Which ethical standard is most clearly violated if a financial manager/management accountant knows of a problem that could mislead users but does nothing about it? a. Competence b. Legality c. Objectivity d. Confidentiality REO UNDERGRAD REVIEW www.reocpareview.ph (074) 665 6774/0916 840 0661 Be accelerated above the rest with REO BASICS REAL EXCELLENCE ONLINE CPA REVIEW handouts@reocpareview.ph Page 5 of 6 | MANAGEMENT ADVISORY SERVICES Handouts No. 01 RHAD VIC F. ESTOQUE, CPA, MBA, CAT, MICB, RCA, CMA BASIC CONSIDERATIONS IN MAS 29. The following statements refer to competence of CPA's in management advisory services except a. In concept, it refers to the technical qualifications of the practitioner and his ability to supervise and evaluate the quality of work of his staff assigned to the engagement so as to be responsible for the successful completion of the project. b. It is acquired by education, self-study, attendance to professional development courses, actual experience in MAS work, and research c. It is the ability to identify client needs, use analytical approach and process, apply technical knowledge, communicate recommendations and assist in implementation d. It must be retained in the rendition of MAS work and it can be impaired if the CPA performs decisionmaking for the client or acts as employee of the client 30. Which of the following statements is true? a. Adequate training and experience in both the analytical approach and process in the particular undertaking are requisites for the CPA to be involved in a management service engagement b. A CPA with MBA and PhD degree is automatically qualified to render MAS. c. Competence as a standard in the rendition of MAS by a CPA may be equated to having excellent scholarly preparation to include the usual baccalaureate degree, an MBA and other post graduate studies. d. A CPA by virtue of having the necessary academic preparation and by hurdling the licensure examinations required to have a CPA license can readily render MAS to the public 31. As a consultant, the CPA practitioner should a. Exercise administrative control over the client's staff to avoid unnecessary delays in implementation b. Encourage dependence of client on the consultant’s staff so as to pinpoint clear responsibility in implementing systems c. Not take responsibility for making decisions and policy judgments in MAS engagements d. Conduct his engagement as if he is a member of the client's organization 32. If a financial manager/management accountant has a problem in identifying unethical behavior or resolving an ethical conflict, the first action he should normally take is to a. Consult the board of directors b. Discuss the problem with his immediate superior c. Notify the appropriate law enforcement agency d. Resign from the company 33. In which situation is a financial manager/management accountant permitted to communicate confidential information to individuals or authorities outside the firm? a. There is an ethical conflict and the board has refused to take action b. Such communication is legally prescribed c. The financial manager/management accountant knowingly communicates the information indirectly through a subordinate d. An officer at the financial manager/management accountant’s bank has requested information on a transaction that could influence the firm's stock price 34. During the course of an audit, the client’s controller asks your advice on how to revise the purchase journal so as to reduce the amount of time his staff takes in posting. How should you respond? a. Explain that under the Code of Ethics you cannot give advice on MAS areas at the same time you are doing an audit b. Explain that under the IFAC Standards informal advice of this type is prohibited. c. Respond as practicable at the moment and express the basis for your response so it will be accepted for what it is. d. Respond and take full account for the consequences of the recommendation. REO UNDERGRAD REVIEW www.reocpareview.ph (074) 665 6774/0916 840 0661 Be accelerated above the rest with REO BASICS REAL EXCELLENCE ONLINE CPA REVIEW handouts@reocpareview.ph Page 6 of 6 | MANAGEMENT ADVISORY SERVICES Handouts No. 01 RHAD VIC F. ESTOQUE, CPA, MBA, CAT, MICB, RCA, CMA BASIC CONSIDERATIONS IN MAS 35. Which of the following statements is not acceptable? a. A CPA represents 3 major players in the industry in rationalizing the industry’s incentives before the government public hearing. b. A CPA shares with a new and substantial client information regarding another client belonging to the same industry. c. A CPA provides consulting services to an existing audit client. d. 2 major competing clients want to employ your services 36. The CPA who undertakes the performance of a MAS engagement should bear in mind that the results should a. Increase the client’s earnings capabilities b. Be communicated in quantitative terms c. Not be set forth as quantitative estimates d. Not be explicitly or implicitly guaranteed 37. Which of the following statements is false? a. CPA's provide MAS to go around the ethical constraints as mandated by the Accountancy Act. b. Businesses hire management consultants to help define specific problems and develop solutions. c. Included in the practice of consulting is the provision of confidential service in which the identity of the client is concealed. d. CPAs performing MAS maybe considered to be in the practice of management consulting. 38. A letter written by the CPA and constitutes the CPA’s understanding of the work to be done in an MAS engagement is a a. Representation letter b. Management letter c. Letter of proposal d. Comfort letter 39. 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. 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. 40. 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 --- END OF HANDOUTS --- REO UNDERGRAD REVIEW www.reocpareview.ph (074) 665 6774/0916 840 0661 Be accelerated above the rest with REO BASICS REAL EXCELLENCE ONLINE CPA REVIEW handouts@reocpareview.ph
