MAS Practice – Management Consultancy and Management Advisory Services

Answers

1. B.
It is the definition of Management Consulting.
Management Advisory Services – area of accounting work concerned with providing advice and technical
assistance to help improve clients improve the use of their resources to achieve their goals.
A person who is qualified in this area is called management consultant.

2. D.
Activities involved in a consulting process
• Determination of client objectives
• Fact-finding
• Definition of problems/opportunities
• Formulation of alternatives
• Communication of results
• Implementation
• Follow-up

3. D.
Activities in MAS engagement
• Negotiating the engagement
• Preparing and starting for an engagement
• Conducting the engagement
• Preparing and representing the report and recommendations
• Implementing the recommendation
• Evaluating the engagement
• Post engagement follow-up

4. C.
Decision-making steps:
• Set objectives
• Identify constraints
• Gather appropriate information
• Identify the alternatives
• Evaluate the alternatives
• Choose the most acceptable alternative

5. A.
A CPA advisor may render study, analyses, research, interpretation, comment, and the like except for
one authority which exclusively belongs to the manager- that is, the power to make decisions. Therefore,
any advisory engagement that requires him to make decisions should be rejected.

6. D.
Characteristics of MAS
• Services are rendered for the management rather than third parties
• Involves problem-solving
• Relates to the future
• Broad in scope
• Involves varied assignments
• Usually nonrecurring
• Engagements require highly qualified staff
• Human relations play a vital role in each engagement

7. C.
 The area of management advisory services has some of the following characteristics: it involves
decisions for the future, it covers a wide area of managerial interests, it deals with a specific problem
where an expert’s help is required.
However, it uses few junior staff as the engagement is highly technical in nature and requires the
competence of the advisor; it is not repetitive nor recurring in nature; it applies technical knowledge of
various fields of discipline; and, it is not governed by GAAP.

8. D.
All of the given choices are areas that relate to management services, such as design and/or installation
of accounting system, financial analysis for project feasibility study, and cost analysis of major investment
decisions.

9. D.
The practice of management advisory services (MAS) does not cover those traditional and originating
fields of accountancy such as auditing, tax services, and legal services. These traditional areas of
services by CPAs have already been in existence before the advent of the MAS practice and have already
developed extensive and highly technical body of knowledge where a specialized area of competence is
available.
MAS includes all areas of serving management outside the traditional services of auditing, tax, and legal
practice. MAS is done in the areas of finance and accounting, industrial engineering, marketing,
production, logistics, human resources, information and communications technology, operations
research, quality control, customer services, marketing, and others which are of concern to management.

10. B.
The control process referred to here is the operating control process. It is done after the planning process
is completed.
Sequence in a management system’s control process:
• Determining standards of performance
• Measurement of actual performance
• Comparing actual performance versus standards and analyzing results
• Deciding and implementing corrective action

11. C.
A CPA-consultant and a CPA-advisor should not take responsibility for making decisions and policy
judgments in MAS engagements (choice-letter “c” is the correct answer).
A professional CPA-advisor has a duty of identifying the problems of the client-organization in a specific
or general business sense, analyzing the causes and effects of the problem, developing and
recommending remedial alternatives, and assisting in the execution and evaluation as to the
effectiveness of the alternative chosen. Still, the CPA-advisor should not make decisions on behalf of the
client. The power to make decisions rests solely on the hand of the management and not of the advisor.
Choice-letter “a” is incorrect because the CPA-Advisor should not exercise administrative control over,
but rather coordinate with, the client’s staff. Choice-letter “b” is also incorrect because a CPA-Advisor
should not encourage dependence of the client on the consultant’s staff but rather should orient the client
on the technique of avoiding and/or solving the same problem in the future. Choice-letter “d” is incorrect
because a CPA-Advisor should always maintain impartiality in his professional conduct and therefore
should not act as if he an employee of the client.

12. D.
Choice-letter “d” is the correct answer because performing management functions and making decisions
are not areas rendered in the practice of management services. A CPA-Advisor who is an independent
outsider in the organization only advises management and he remain as such in the performance of MAS
assignments. Once, the CPA-Advisor makes decisions for and on behalf of his client, he ceases to be
an advisor and automatically becomes a manager.
Choice-letters “a”, “b”, and “c” are all areas related to the performance of management services such as,
but not exclusive to, introducing new ideas, concepts, and methods to management; improving existing
 policies, methods, and procedures; and, performing special studies, preparing recommendations, and
formulating plans and programs for his client.

13. C.
Choice-letter “c” is not a true statement. MAS serves not only in the area of accounting and finance but
in all other areas of management interests ranging from human relations, marketing, channels of
distribution, design and engineering, customer services, industrial engineering, logistics, strategic
planning, and other areas of management.
Choice-letters “a”, “b”, and “d” are all true statements regarding MAS practice. Choice-letter ”a” refers to
independence in the MAS practice, choice-letter “b” refers to compliance and adherence to professional
ethics save for those that specifically relate to the expression of opinion on financial statements under
audit, and choice-letter “d” relates to the MAS Practice Standard of client benefit.

14. A.
Statement 1 is true. Statement 2 is false because MAS consultancy, like MAS advisory services, applies
analytical processes and approaches. Statement 3 is false because the client, inasmuch as he owns the
business organization, always reserves the right to make decisions with respect to the firm and that does
not exclude deciding for or against the continuance or interference in the advisory services conducted by
an independent professional service provider, such as a CPA engaged in MAS practice.

15. D.
Choice-letter “d” is the correct answer because it refers to the standard of independence where a CPA
advisor should not make decisions for and on behalf of his client or acts as if he is an employee or officer
of his client.
Choice-letter “a”, “b”, and “c” all relate to the standard of competence. Competence, which is the
paramount standard of all the nine (9) MAS practice standards, requires the CPA advisor to have the
technical skills, expertise, and mastery to render the professional work demanded by the management.
He has a reputable understanding and applications of concepts, principles, and methods needed in a
given business advisory service. His skills are acquired through formal education (i.e. schooling), on-the-
job training, researches, attendance in seminars, conventions, fora, discussions, etc., actual experience
in MS work, self-study, and other modes of obtaining competence. Competence is the ability to identify
client’s needs and problems (not the symptoms), use analytical approach and processes throughout the
engagement process, apply technical knowledge, communicate findings, conclusions and
recommendations, and assist in the implementation of the client’s decision.

16. A.
Choice-letter “a” deals with competence. It is the ability of a MAS practitioner to apply analytical approach
and processes using his technical knowledge and expertise which are required through formal education,
training, under study, apprenticeship, on-the-job training, professional experience, advanced studies,
researches, and the like. Statement letter “a” is a true statement..
Choice-letter “b” is false because a CPA is not automatically qualified to render management advisory
services even if he had earned his MBA and PhD degrees; the qualification is competence and not merely
educational attainment. Choice-letter “c” is incorrect because competence is not equated to having
excellent and scholarly preparation. Competence refers to the ability to perform tasks with the required
mastery of knowledge, skills and expertise and come out with the optimum output at the least cost
involved. Competence is not heavily related to academic preparation but more on the hands-on
experience of a person. Choice-letter “d” is also incorrect because having completed the necessary
college degree in accountancy and hurdle the CPA licensure examinations do not automatically qualify
a CPA to handle management advisory services inasmuch as competence in practice is the primary
consideration in accepting a management advisory services engagement.

17. D.
Independence is impaired when the CPA is influenced as to his decision. In his professional endeavor,
the CPA must act with impartiality and fairness, devoid of bias that may produce distorted information
leading to inappropriate management decisions. However, when the CPA does not extend his services
 beyond the presentation of recommendation of giving advice, he does not impair his independence, and
choice-letter “d” is correct.
Choice-letters “a”, “b”, and “c” are all situations where the practicing CPA loses his independence, such
as performing decision-making services for his client, or performing services wherein he is in effect acting
as an employee of the client, or acts in a manner as if he is advocating for the interest of his client.

18. A.
Choice letter “a” is correct because management advisory services is considered as an integral part of
public accounting within the meaning of the provisions of the Accountancy Act of 2004. Choice letter “b”
is incorrect because certified public accountants are not allowed to advertise nor charge contingent fees
in the conduct of their practice. Choice-letter “c” is also incorrect because there is no express provision
in the law prohibiting CPAs to extend their professional services to their existing audit clients. Choice-
letter “d” is also incorrect because all CPAs, regardless of specific field of endeavor, as long as they are
in the practice of accountancy are bound to adhere to the provisions of Accountancy Act of 2004.

19. A.
Choice-letter “a” is a false statement because CPA’s who are in the practice of MAS are still covered by
the provisions of the Accountancy Act of 2004 and the Code of Ethics for Professional Accountants since
they are still CPAs in the practice of their profession, except those provisions that pertain to the
expression of opinion of financial statements under audit.
Choice-letter “b”, “c”, and “d” are true statements with regard to the practice of management advisory
services.

20. B.
A CPA-advisor should not make a decision on behalf of the management. Additionally, the CPA advisor
should comply with provisions contained in Accountancy Act of 2004 and the Code of Ethics for
Professional Accountants and those guidelines mentioned in the MAS Practice Standards.
Choice-letter “b” is not acceptable for a CPA-Advisor to share with a client any classified, material,
confidential, or substantial information regarding another client. This relates to the rule and ethics of
“confidentiality with the client” of which the CPA is bound to observe and uphold. Choice letter “b” is the
correct answer.
Choice-letters “a”, “c”, and “d” are all acceptable for a CPA advisor to do because they do not violate any
provisions in the Accountancy Act of 2004, Code of Ethics for Professional Accountants, and does not
run counter to any of the MAS Practice Standards.