Department of Accounting Education

Mabini Street, Tagum City

Davao del Norte
Telefax: (084) 655-9591, Local 116

Big Picture in Focus: ULOc. Discuss the Stages of

Management Consulting Engagement.

Metalanguage
For you to demonstrate ULOc, you will need to have an operational understanding
of the following terms below. Please note that you will also be required to refer to
the previous definitions found in ULOa and ULOb section.
1. Expected value. A letter of proposal is a written communication between the
CPA and the client setting forth the terms and conditions of a proposed
consultancy work.
2. Engagement program or work plan. It is an operational plan for conducting
a management service engagement.
3. Problem stating. It involves the formulation of a comprehensive and valid
statement of the problem.
4. Charting. It is a fact-gathering technique that provides a pictorial representation
of a dimension of the client's organization or of its activities
5. Organizational Chart. It is often useful to prepare a brief narrative describing
the functions and role of each manager.
6. Data flow diagram. This is a logical view of data flows through a system. It
clearly portrays the workings of a complex system, such as a transaction
processing system.
7. System flowchart. It depicts an overall view of a system in terms of major
elements such as processing programs or runs, files, inputs, and outputs. It
provides clear documentation of either a present system or a proposed system.
8. Detail flowchart. A detail flowchart graphically represents the logic of a
process.
9. Decision table. It is a viable alternative to a detail flowchart, since it portrays a
situation involving logic.
10. Brainstorming. Involves a free flow of ideas among the group members. Ideas
are received without restriction or criticism and later sifted to find those that are
judged to be the best.
11. Delphi approach. Opinions are obtained from managers concerning
impending present problems or future conditions. A consensus of the opinions
is used to arrive at a decision.
12. Categorization. It is a process whereby data, facts or items are sorted into
different groups by virtue of their features. This allows the significance of the
information to be identified.

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 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

13. Classification. It is also a process whereby items are sorted into different
groups. This time, however, the groups are defined by external criteria rather
than by arbitrary features.
14. Numerical analysis. It is any technique where numbers are combined in order
to understand how they relate to each other.
15. Association. It is the recognition that two things are connected in some way.
16. Correlation. It is more precise than association. It is the recognition that the
variation in one variable occurs in step with that of another.
17. Causation. It explains correlation. Causation suggests that two variables are
correlated because there is a cause and effect link between them.

Essential Knowledge
To perform the aforesaid big picture (unit learning outcomes), you need to fully understand
the following essential knowledge laid down in the succeeding pages. Please note that you
are not limited to exclusively refer to these resources. Thus, you are expected to utilize other
books, research articles and other resources that are available in the university’s library e.g.
ebrary, search.proquest.com etc., and even online tutorial websites.

Generally, a management consulting engagement involves the following stages:

I. Negotiating the engagement
II. Engagement planning
III. Conducting a consulting assignment
a. Problem identification and solution
b. Identification of suitable and accurate sources of information
c. Data analysis and diagnosis
d. Solution development
e. Preparation and presentation of the report and recommended
solution
f. Implementation
g. Follow-up evaluation of the implemented solution
IV. Evaluating the engagement and post-engagement follow-up

Variations in the above-enumerated stages may occur depending upon the nature and
additional requirements of clients seeking the services of the CPA.

1. NEGOTIATING THE ENGAGEMENT

This involves the stage where the CPA and the client discuss the proposed
professional consulting services. It is the process whereby the client decides whether
or not he wishes to engage the CPA and the CPA determines whether or not he can
accept that assignment. As far as the CPA is concerned, he should accept the

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 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

engagement only if he knows that the work can be successfully undertaken. The steps
necessary to assess this can be summarized as follows:
1.0.1. Ascertain the real problem and what is required to reach a solution. This
may require a limited survey before a responsible conclusion can be made.
1.0.2. Identify the end product of the assignment, i. e., report or findings,
suggested systems, installation of the system or other objectives.
1.0.3. Agree on the role to be performed by the CPA. This may vary from
occasional consultation to full-time participation by one or more staff
members who perform significant portions, or all of the work.
1.0.4. Agree on the basis for establishing and billing fees.
1.0.5. Confirm understanding in writing. (AICPA MAS Guideline Series No. 1).

1.1. Proposal Letter

The preparation of a proposal letter is an advisable first step in most MAS
engagement. A letter of proposal is a written communication between the CPA and
the client setting forth the terms and conditions of a proposed consultancy work. It may
be prepared by either the CPA or the client.
Purposes of the proposal letter are:
 To minimize misunderstandings between the CPA and the client.
 To assist in better administration of the engagement.

The proposal letter will vary widely from engagement to engagement but generally will
include:
 The objectives and benefits of the engagement.
 The scope of the work and the role of CPA.
 The approach to the study.
 The project organization.
 Fees and billing arrangement.
 Firm qualifications, where appropriate.

1.1.1. Objectives and Benefits

The proposal letter should describe clearly the objective of the engagement. These
objectives should establish the benefits to be derived, examples of which are:
improved customer service, better management reporting, reduced costs, improved
operating efficiency and the like.
1.1.2. Scope of the Work and Role of the CPA
The extent of the work to be done and the degree of participation, joint or individual,
of client and CPA personnel should be clearly stated. In certain instances, the client
may wish to have the CPA act in an advisory role and expect its own employees to
perform the detail work.

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 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

1.1.3. Approach to the Study

The proposal letter should be accompanied by an engagement program if one is to be
prepared as the initial phase of the proposed engagement. The client should
understand how the work will be undertaken and the specific approaches such as the
following might be covered in the letter or in the engagement program:
1.1.3.1. Data gathering methods such as questionnaires and interview check
lists.
1.1.3.2. Flowcharting and documentation testings.
1.1.3.3. Extent of use of mathematical methods such as linear programming and
simulation.
1.1.3.4. The order in which the various phases of the project are to be
undertaken.

1.1.4. Project Organization

The proposal letter should specify how the CPA and client personnel are to be
assigned and organized, and what the working relationship between them and the
client's organization should be. The following should also be specified:
1.1.4.1. Functions and responsibilities to be assigned to the project.
1.1.4.2. Number and types of personnel.

1.1.5. Fees and Billing Arrangements

The fee estimate, the frequency of interim and final billing and the method of billing
should be included in the proposal letter. The following factors should be considered
in setting the fee to be charged to MAS clients:
1.1.5.1. Nature of the MAS job.
1.1.5.2. The job's degree of difficulty and complexity.
1.1.5.3. Qualifications of the staff required.
1.1.5.4. Time involved.
1.1.5.5. Technical importance of the service to the client.

2. ENGAGEMENT PLANNING
Engagement planning actually begins the first time the consultant is contacted by a
potential client, and continues in more detail as the project proposal is presented. After
the proposal is accepted, a detailed work plan is developed which will become the
blueprint of the remainder of the project.
2.1. Engagement Program or Work Plan
2.1.1. Contents
2.1.1.1. The program, which can take many forms, should contain the
following:

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 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

2.1.1.2. The objectives and a description of each task to be accomplished.

2.1.1.3. A description of tangible output required at completion of each
task.
2.1.1.4. A list of manpower required.
2.1.1.5. A list of the personnel assigned.
2.1.1.6. The starting and completion dates.
2.1.1.7. Project costs.

2.1.2. Objectives
Engagement program or work plan is an operational plan for conducting a
management service engagement. The engagement programs
2.1.2.1. Provide a means for arranging, distributing and assigning
responsibility for various segments of an engagement.
2.1.2.2. Provide a means of control for determining whether all segments
of the engagement have in fact been completed.
2.1.2.3. Provide the framework for reporting progress of an engagement.
2.1.2.4. Facilitate time and efficiency control over personnel assigned to
the engagement.
2.1.2.5. Assist in an engagement review by a partner or supervisor
2.1.2.6. Provide the basis for estimating fees.

3. CONDUCTING A CONSULTING ASSIGNMENT

3.1. Stages of a Problem Solving Process
Most engagements handled by consultants will involve the solution of problems.
Therefore, a process that emphasizes the solution of problems is of great interest to a
consultant. A sound problem-solving process consists of:
3.1.a. problem identification and desired outcome
3.1.b. identification of suitable and accurate sources of information and
data-gathering
3.1.c. data analysis and diagnosis
3.1.d. solution selection
3.1.e. preparation and presentation of the report and recommended solution
implementation of recommended solution
3.1.f. follow-up evaluation of the implemented solution

Each phase has one or more distinct purposes and occupies a separate time period
within the overall process.

3.1.1. Problem Identification and Desired Outcome

Problem definition is the first phase of the problem-solving process and its
position in the process is well-established. The term problem definition
assumes a variety of meanings since it is used by numerous parties in
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 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

reference to a wide variety if problem-solving situations. A generally accepted

definition however may be expressed as follows:
"A problem is said to exist when the observed behavior of a system or process
violates the bounds of reasonable expectations."
This definition usually requires the existence of the following factors:
(a) Human awareness of the problem, (b) Predefinition of the allowable
tolerances, and (c) Recognition of the established standards.

A problem requires that involved human be aware of the implications of the existing
situation. For example, if no one recognizes a system or process going beyond the
bounds of reasonable expectations, no problem is truly apparent.
A problem also requires that the suitable tolerances be defined at the outset. This
means that allowable deviations or variances from the ideal situation should be known
to determine when the system or process is beyond the bounds of reasonable
expectation.
Lastly, expectations and standards should be recognized and known. Quantitative
standards, such as sales quotas and budget levels are easily recognized as are
variations of actual values from these standards. Qualitative standards though not
easily recognized are pervasive in the realms of human relationships and human-
oriented process.
3.1.1.1. Problem Definition Phase
The problem definition phase begins with the initial recognition of a symptom
pointing to the problem and ends with the complete problem description. Key
facets of the problem description include among others:
3.1.1.1.a. Identity of the problem.
3.1.1.1.b. Objectives of the problem-solving process.
3.1.1.1.c. Scope of the problem.
3.1.1.1.d. Intensity of the problem.
3.1.1.1.e. Time dimension of the problem.
3.1.1.1.f. Location of the problem.
3.1.1.1.g. Human elements involved in the problem.
3.1.1.1.h. Support system surrounding the problem.
3.1.1.1.i. Tracking system related to the problem.
3.1.1.1.j. Institutional process for managing the problem.

3.1.1.1.A. Identity of the Problem

The first question asked and the last question that a consultant answers during
the problem definition phase is
What is the problem?

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 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

The final answer to this question will emerge only after completing two
procedures, namely
 Problem finding, and
 Problem stating.

Problem finding involves the identification of the:

 reasonable explanations pertaining to a system or process, and
 allowable tolerances from these reasonable expectations.

An example of the problem finding procedure, especially familiar to

accountants, is the operation of a standard cost accounting system. The first
step is to establish (1) standards for unit direct materials and unit direct labor
costs and (2) allowable variances from these standards. Periodically, the actual
unit direct materials and direct labor costs are compared with these standards.
Variances that exceed the allowable ranges are flagged for the attention of
production management.
Problem stating involves the formulation of a comprehensive and valid
statement of the problem. This may represent an expanded and polished
version of the initial statement. The final statement of the problem should
contain such facets as the objectives to be achieved by the solution to the
problem; the problem's scope, intensity, time dimensions, and location; the
human elements involved in the problem, the support system and tracking
systems related to the problem solution; and the institutional process for
managing the problem. In addition, the statement may clearly separate the
symptoms from the underlying causes of the problem, identify relevant
constraints, and reveal key relationships among the factors involved in the
problem situation.
The consultant should also be aware of and avoid possible pitfalls in identifying
the problem such as
 Mistaking symptoms for the underlying problem.
 Accepting without question the opinions of others concerning the
problem.
 Assuming that the problem is a person rather than the behaviour or
nonbehavior of people.
 Assuming that the person who reports the problem is the cause of the
problem.
 Overlooking the multicausality of problem.

All the underlying causes of the problem should be isolated and clearly stated.
It may also help uncover key interrelationships among the causal factors.
3.1.1.1.B. Objectives of the Problem-solving Process
The desired outcome is generally the objective of the problem-solving process
and should be permanently expressed in the problem definition statement in

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 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

terms of clear-cut expectations or benefits. The nature of objectives depends

upon the type of problems, as well as the system or process involved. It may
be expressed quantitatively with designated time horizon. For instance, an
objective might be stated as follows:
"To improve deliveries of goods so that by the end of the year 99.5% of
all deliveries are made on time."
Typical objectives pertaining to systems and processes in business entities are
concerned with performance, efficiency, economy, control, security or
availability of information.
3.1.1.1.C. Scope of the Problem
A clear statement of problem scope should suggest the extent of the needed
response or solution to the problem. It might also point to the need for
repackaging the consulting engagement. For instance, if the scope is
discovered to be immense and to extend to a variety of activities, it may be
desirable to break the engagement into a series of smaller problem areas. Each
partial problem can then be solved more easily, and the solutions can be
combined to attack the overall problem.
3.1.1.1.D. Intensity of the Problem
Another key aspect of the problem is its intensity - that is, the degree of difficulty
or adverse effects they bring to interested parties. The level of intensity may
determine the relative urgency and importance of initiating a particular problem-
solving process.
3.1.1.1.E. Time Dimensions of the Problem
With the time dimensions of a problem, answering the following questions:
How long has the problem existed?
How much longer is the problem likely to continue if left unsolved?
How often is the problem likely to occur in the future?
is important and will help in the development of a solution.
3.1.1.1.F. Location of the Problem
The location, or focus of the problem is the geographic point or points where it
occurs. While in most problem situations the location can be easily determined,
in some extreme situations the location may require laborious retracings of
tangled paths. In every situation, however, pinpointing the location is necessary
to provide a complete description of the problem
3.1.1.1.G. Human Elements of the Problem
Human-related elements should be identified and assessed in the statement of
the problem. Examples are:

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 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

 Attitude of involved managers and employees

 Personal traits of involved managers and employees including intelligence,
motivation, leadership, quality, dependability, trustworthiness and
interpersonal skills.
 Training of involved managers and employees.
 Tenure of involved managers and employees.

Another human-related element that may often appear in the problem

statement is the prevailing political climate. An assessment of this climate
should be included as well as an assessment of the priorities that have been
established by the policy-makers.
3.1.1.1.H. Support System Surrounding the Problem
Elements that comprise a support system should be identified in the problem
statement together with an analysis of their functional or dysfunctional effects
upon the problem.
3.1.1.1.I. Tracking Systems Related to the Problem
A tracking system often detects a problem. The problem statement should
reveal:

o How the problem was brought to light

o Whether the problem was detected by a tracking system so designed for the
purpose, or by another means (if not detected by the tracking system so
designed for the purpose, why the tracking system failed)
o Whether tracking systems other than the one designed for the purpose
should have detected the problem
o Whether tracking systems are available to monitor the situation reliably, as
well as to measure the degree of improvement in the process or system due
to an implemented solution

3.1.1.1.J. Institutional Process for Managing the Problem

Problems in an organization are managed (i.e., defined, processed, delegated,
solved) through an institutional process. The process may be informal in nature,
with the management tasks being assigned quickly and with little written
evidence. On the other hand, it may be quite formal, involving a chain of
command and such written evidence as elaborate charts and graphs. The
degree of informality or formality in the institutional process may extend outside
the organization structure to encompass customers, lenders, suppliers, and
consultants.

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 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

3.1.2. Identification of Suitable and Accurate Sources of Information and Data

Gathering
Facts help the consultant in sorting out client symptoms from client problems as well
in structuring and organizing the problems. They form the foundation for prospective
solutions and direct the consultant to the solution ultimately rendered. Because facts
serve such important functions, the consultant must be resourceful in fact gathering
and skillful in fact analysis.
This section deals with fact sources and identifies places where the consultant can
look to find facts associated with the operation of a client.
A wealth of internal and external fact sources are available to help the consultant to
zero in on a client's problem.
Internal and external fact sources for a typical business firm are listed in Figure 2 and
3.

Figure 2. Internal Sources of Facts

Figure 3. External Sources of Facts

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 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

3.1.2.a. Internal Sources

3.1.2.a.1 People are the most important source of facts. The term people
includes not only a client's management but also its clerical,
marketing and production employees. It is the consultant's job to
distinguish between facts from fantasies and identifying
information tinged with biases

3.1.2.a.2 Client documentations are the second important source of facts.

Most organizations classify their documentation that describe
o How the organization is structured
o What the organization has been doing
o What the organization plans to do

Documents typically found in a client organization include:

Caution, however, should be undertaken in using documentation as source of

facts because it is possible that plans change while the related documentation
remains unchanged.
3.1.2.a.3. A third internal source of facts important to a consultant can be
termed as relationships. Defining the relationships among people,
departments, and functions can provide you with information and
insights unknown or undocumented anywhere else within the
organization
3.1.2.b. External Sources
Sources from outside the organization provide many facts about the company.
For example, facts may be gathered from customers concerning their
perceptions of the client's products and services as compared to those of the
major competitors. A company's sales forecast may also be tested for
reasonableness by comparing them to projections obtained by an econometric
model of the company.

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 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

3.1.2.1. Fact-Gathering Techniques

At the beginning of an engagement, a consultant's important task is to separate
the symptoms experienced by a client from the underlying problems. It is the
problem rather than the symptoms that need close attention and treatment.
The following techniques are available for gathering facts concerning the
underlying problems:
o Interviews
o Questionnaires
o Observation
o Document gathering
o Charting
 Organization chart
 Data flow diagram
 System outflow
 Detail flowchart
 Decision table

3.1.2.1.a. Interviews
o A series of interviews with client personnel is considered the best way to
zero in on problems.
o It can be conducted at all levels of the organization, from the president
down to the rank and file employees.
o The consultant should have temperament to adjust to people who have
differing commitments to the client's goals as well as to many
environmental variables.
o During the interview itself, remember to:
 Confirm understanding of the interviewee's job responsibilities and
duties.
 To the extent possible, ask specific questions that allow quantitative
responses.
 When questions are answered vaguely, pursue them in a pleasant
way) until they are fully clarified.
 Try to develop an awareness of the interviewee's feelings. This can
best be achieved by listening well and reading the interviewee's
"body language".
 Avoid stating own opinions or acting like a "know-it-all person."
 As the interview draws to a close, ask the interviewee if he or she
has additional ideas, thoughts, or suggestions concerning the topics
of discussion: "Do you have any additional suggestions or
recommendations concerning the method used to calculate budget
variances?"
 Do not allow the interview to be too lengthy.

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 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

 At the end of the interview summarize the main points uncovered,

thank the interviewee, and indicate that he or she will be contacted
again if further questions are necessary.

3.1.2.1.b. Questionnaire
o The use of a series of prepared questions somewhat restricts channel of
communication and should be used with great care for the purpose of
fact finding.
o This is best used when the persons from whom the consultant wants
information are physically removed and travel is prohibitive or when
numerous persons are to be asked and the facts to be so determined
are verifiable from other sources.
o To be more specific, follow these guidelines:
 Explain in an accompanying letter the purpose, use, security, and
disposition of the responses generated by the questionnaire.

 Provide detailed instructions concerning how the questions are to be

completed.
 Provide a time limit or deadline for return of the questionnaire.
 Format questions so that responses can be tabulated mechanically
or manually.
 Ask pointed, concise questions when possible.
 If a question cannot be answered objectively, provide an opportunity
for the respondent to add a clarifying comment.
 Provide sufficient space for complete responses.
 Include a section in which respondents can state opinions and
criticisms.
 Identify each questionnaire by the respondent's name, job title,
department, and so forth.

3.1.2.1.c. Observation
o Facts can be gathered by observing the employees of a client perform their
job-related duties.
o The technique of observation is useful in gathering facts prior to an
interview, in verifying statements made during an interview, and in
ascertaining relationships between individuals.
o The usefulness of observation can be maximized by following these
guidelines:
 Before beginning, identify and define what it is that the consultant will
observe; also estimate the length of time that the observation will entail.
 If persons are to be aware of the observations, explain to them what will
be done and why.

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 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

 Note the time periodically while making the observations.

 Record what is observed as specific as possible, avoiding generalities
and vague descriptions.
 Avoid expressing value judgments when interacting with persons being
observed.
 Document all impressions and organize the notes as soon as possible
after the observation period.
 Review the facts obtained and the conclusions drawn from observations
with (a) the person being observed, (b) the person's supervisor, and with
(c) the consultancy firm's supervisor (when desirable).

3.1.2.1.d. Document Gathering

Another technique for gathering facts is to collect all relevant documents, i.e.,
source documents, work sheets, reports, and so forth. From these documents,
one can gain an understanding of what is presently done and how it is
organized, what is not available, and perhaps what the client considers to be
important. Efforts in gathering facts during interviews and observations can
often be enhanced if copies of documents have been gathered and are in hand.
Moreover, if one has a working understanding of the client's documents, one
can increase the likelihood of smooth communications with the client personnel.

3.1.2.1.e. Charting
Charting is a fact-gathering technique that provides a pictorial representation of
a dimension of the client's organization or of its activities. This technique is
highly valued, since it also facilitates analysis, synthesis communication, and
documentation.
3.1.2.1.e.1 Organization chart. The organization chart provides facts
concerning reporting relationships, quantities of resources,
and levels of authority and responsibility within the client's
organization. It is often useful to prepare a brief narrative
describing the functions and role of each manager appearing
on the organization chart.
3.1.2.1.e.2 Data flow diagram. This is a logical view of data flows through
a system. It clearly portrays the workings of a complex system,
such as a transaction processing system.
3.1.2.1.e.3 System flowchart. A system flowchart depicts an overall view
of a system in terms of major elements such as processing
programs or runs, files, inputs, and outputs. It provides clear
documentation of either a present system or a proposed
system. Generally, it pertains to a computer-based information

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 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

system. In contrast to a data flow diagram, therefore, it

specifies the physical nature of the data processing and data
storage.
3.1.2.1.e.4 Detail flowchart. A detail flowchart graphically represents the
logic of a process. Generally, it describes the logic of a
computer program or run.
3.1.2.1.e.5 Decision table. A decision table is a viable alternative to a
detail flowchart, since it portrays a situation involving logic. It
particularly facilitates the understanding and communication
of decision processes having complex logic (i.e., multiple
conditions).

3.1.3. Data Analysis and Diagnosis

In most consulting engagements, a consultant needs to apply a variety of fact analysis
techniques. Four representative approaches to analysis - decision-level, input/output,
structured, and unstructured analysis - are described below. All are useful, though
consultants (like artisans) are likely to use one type more than another.

3.1.3.a. Decision-Level Analysis

Decision-level analysis has the purpose of depicting the varied interrelationships
among the decisions made throughout the segments and levels of organization. It is
useful in demonstrating to client management the variety and kinds of decisions that
the organization must make.
This analytical approach begins with interviews of key client managers. During the
interviews, the consultant focuses on resources, since resource allocation and usage
are the concern of most decisions. The initial concern is to categorize the major
tangible and intangible resources of the organization, such as inventories, plant and
equipment, employee skills, and so on. After categorizing these resources, the
consultant identifies the resources required at each decision level of the organization.
Then, the consultant ascertains the specific items of information, as well as their
sources, needed to make decisions concerning these resource requirements.

3.1.3.b. Input/ Output Analysis

A problem situation may be analyzed in terms of its inputs and outputs. It should be
noted that while each input and output is described, nothing is included concerning the
process (i.e., how the input is converted to output), the data requirements, the
information flows, or the related decisions.

3.1.3.c. Structured Analysis

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 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

The key assumption underlying this approach is that any organization is comprised of
a number of well-defined functions, which in turn are made up of a group of activities.
By focusing upon these functions and supporting activities, you can gain a clear
understanding of the inputs, processing, and outputs of the organization.
In performing structured analysis, the preferable procedure is to begin at the top level
and then work down to the lowest activity level. Large functions can be repeatedly
subdivided through several levels, until the smallest activity is isolated. The resulting
structure is an upside-down treelike function diagram, similar in appearance to an
organization chart Like the organization chart, this function diagram helps you to see
relationships among the activities of a function.

3.1.3.d. Less-Structured Analysis

Unstructured approaches to fact analysis could be employed to counteract some
limitations of the structured approaches such as (1) difficulty in application and (2)
stifling of creativity of the consultant There are at least two unstructured approaches
that can help extract and analyze facts. These are
 Brainstorming. Involves a free flow of ideas among the group members. Ideas
are received without restriction or criticism and later sifted to find those that are
judged to be the best.
 Delphi approach. Opinions are obtained from managers concerning impending
present problems or future conditions. A consensus of the opinions is used to
arrive at a decision.

3.1.3.1. Creative Approaches to Analysis

3.1.3.1.a. The Importance of Creativity and Innovation
One of the fundamental changes in the way managers approach their tasks has been
the growth in the information available to them.
Despite the growth in the availability of information, managers' jobs do not seem any
easier. If anything they are harder. Managers must learn not only to make decisions
but also to collect, manipulate and store ever more data upon which effective decision-
making must be based.
Ultimately, most managers have access to the same information about the competitive
world they work in. Numerous commercial and government organizations offer
information and analysis on business sectors. Modem market research techniques
can quickly identify new potential business opportunities. The Internet provides a
stream of information on customers, suppliers and competitors.
Competitiveness is built not so much on access to data but on ability to use it
effectively. Underpinning this is the ability to identify and adopt an appropriate analysis
strategy So that data become information and information becomes the knowledge
that leads to effective decision-making.

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Whatever the analysis technique adopted, analysis is an area where the consultant
can add value. The consultant creates value by identifying the client's decision-making
requirements, directing the client towards the right technique, assisting him or her in
using it and helping to identify the insights it offers.
3.1.3.1.b. Analysis Strategies
3.1.3.1.b.1. Categorization
Categorization is a process whereby data, facts or items are sorted into different
groups by virtue of their features. This allows the significance of the information
to be identified. Categorization is different to classification. Categorization
makes no demands on theoretical insights, whereas classification does.
Important examples of categorization used in management include the
strengths weaknesses opportunities-threats ("SWOT') model and the political-
economic-sociological-technological ('PEST") model used to analyze a
business and its situation.

3.1.3.1.b.2. Classification
Classification is also a process whereby items are sorted into different groups.
This time, however, the groups are defined by external criteria rather than by
arbitrary features. An example of the use of classification is
Porter's generic strategy model (1980). Here, a business's strategy is defined
as cost leadership, differentiation or focus. These criteria are theoretically a
priori. They are derived from theoretical insights as to how businesses compete.
These strategies do not have simply an arbitrary relationship to each other (as
do the categorization examples). Rather, they are defined by the external
criteria of competitive approach and business scope.

3.1.3.1.b.3. Numerical analysis

Numerical analysis is any technique where numbers are combined in order to
understand how they relate to each other. An equation or function is a *recipe',
which describes in definite terms how the numbers should be combined.
The simplest form of equation is the ratio. In a ratio one number is divided by
another so that the relative magnitudes of the numbers, rather than their
absolute magnitudes, are revealed. Financial analysis uses a variety of
profitability and liquidity ratios to assess the performance and stability of a firm.
Statistical analysis uses more complex numerical relationships. It is used in a
wide variety of business situations, including market research. Management
science is a technical discipline that offers a highly sophisticated mathematical
approach to support managerial decision-making.

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3.1.3.1.b.4. Association
Association is the recognition that two things are connected in some way. If two
things are associated this suggests that the consideration of one thing might be
made easier, or more revealing, if the other thing is concerned at the same time.
An example of association might be the fact that managers usually notice
competitors within their own strategic group more than those in other strategic
groups. Here the association is made between an organization's presence in a
strategic group and the cognitive picture of competition held by a manager from
that organization. Another example arises from the qualitative market research
where buyers associate different products and the degree to which they might
be substituted with each other.

3.1.3.1.b.5. Correlation
Correlation is more precise than association. It is the recognition that the
variation in one variable occurs in step with that of another. A correlation may
be identified statistically by the measure of a correlation coefficient. A
correlation of +1 indicates that the two variables follow each other perfectly and
in the same direction. A correlation coefficient of indicates that the two variables
are totally independent. A correlation coefficient of -1 indicates that the two
variables follow each other perfectly but in opposite directions.
Correlation suggests that there might be a causal link between the two variables
but it does not prove it. A good correlation is suggestive, though. It is an
invitation to explore further for possible causal relationships.

3.1.3.1.b.6. Causation
Causation explains correlation. Causation suggests that two variables are
correlated because there is a cause and effect link between them. It provides
an important insight for management because, if a causal link exists, control of
the cause will automatically lead to control of the effect.
The relationship between planning and performance provides a very good
example of the problem of assigning cause and effect in management. This is
particularly pertinent to us as so many consultancy exercises advocate and
involve planning activity.

3.1.4. Solution Development

Solution development is the third phase of the problem-solving process. The steps
involved in this phase are
3.1.4.i Generation of solution alternatives
3.1.4.ii Evaluation of solution alternatives

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3.1.4.iii Choice of the preferred solution alternative

3.1.4.iv Detailed development of the selected solution

The solution development phase links to the previous phases through the deliverables,
i.e., the developed solution that is to be presented as the final recommended product.
Thus, it links to the problem definition phase through the objective and other aspects
revealed in the statement of the problem definition. It links to the fact-finding and
analysis phase through the specifications of requirements and criteria and final
recommendation. The range of recommendation that consultants may be expected to
produce are
 Solution to specific problem
 Educational course or training program
 Designed system component
 Implemented system development life cycle
 Advice or assistance
 Expert opinion

3.1.4.1 Generation of Alternative Solutions

The first step in the solution development phase is to generate and thoroughly search
for solution alternatives. A variety of well-defined and controllable approaches can be
identified. These are
3.1.4.1.a. Pattern recognition and matching approach. This approach emphasizes
experience especially those having very similar characteristics to the
problem situation being investigated.
3.1.4.1.b. Brainstorming approach
3.1.4.1.c. SCAMPER approach. This acronym stands for Substitute, Combine,
Adjust, Magnify, Put to other uses, Eliminate and Reverse.
3.1.4.1.d. Delphi approach. This employs an idea-generation concept similar to
brainstorming. Experts are individually polled for ideas and these ideas
are subsequently summarized and presented to each participant. Each
participant reviews the feedback and the consultant again polls the
experts to establish collective responses and the process is reported
until the responses have stabilized.

Then the stabilized results are summarized and presented as the refined
ideas of the collective experts.

3.1.4.2. Evaluation of Solution Alternatives

After the alternative solutions are identified and refined, they must be evaluated to
determine the most preferred solution. This evaluation should be based upon a
situational feasibility analysis that considers all relevant dimensions. A very important
evaluation step is the comparison of alternative solutions by means of established
criteria, represented by qualitative and quantitative factors chosen by the evaluator.

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Example of qualitative factor is customer satisfaction while a quantitative criterion the

return on assets ratio.
Each alternative solution is evaluated, through the criteria, against all other solution
alternatives and implicitly against the existing situation. Thus, an alternative solution
that does not represent as improvement over the existing situation may immediately
be eliminated.
Among the areas of consideration by which each alternative solution may be analyzed
are
3.1.4.2.a. Economic feasibility or cost/benefit analysis
This may require the application of the more commonly used models as break-
even analysis, payback, net present value, internal rate of return, optimal capital
budget or make or buy analysis.

3.1.4.2.b. Operational feasibility

This pertains to the usability of each solution alternative in the environment and
the persons for whom it is intended. Example areas to be considered are:
capability of management, maturity of the organization, political environment,
etc.

3.1.4.2.c. Technical feasibility

This is concerned with the adequacy of the existing state of technology to meet
the requirements of each solution alternative. Such consideration should
include assessment of available hardware and software, capability of personnel
and experience and aggressiveness of the organization.

3.1.4.2.d. Scheduling feasibility

This involves the determination if the alternative solution can be rendered
operational by a specified time and/or date in order to achieve certain objectives
or avoid certain consequences

3.1.4.2.e. Legal feasibility

This concerns the ability of each alternative solution to meet the legal
requirements imposed by outside authorities.

3.1.4.2.f. Other evaluation factors such as simplicity, flexibility, adaptability,

sensitivity, and reliability.

3.1.4.3. Choice of the Most Preferred Solution

The general rule to be followed using a decision process is
"Choose the alternative solution that yields the best fit or value relative to the
established criteria."

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This rule can be easily applied when factors can be quantified and related by an explicit
decision model and when values concerning the future situation are known with
complete certainty. However, these conditions usually seldom exist.

3.1.4.3.a. Approaches in an Environment of Certainty

In a certainty environment, there is only one event and therefore only a single outcome
for each action. When an event is certain, there is a 100% chance of occurrence,
hence the probability is 1.0. Two approaches may be used in choosing preferable
solution alternative in this environment:
3.1.4.3.a.1 Optimizing approach which typically employs one of the
mathematical techniques such as linear programming, integer
programming, and dynamic programming.
3.1.4.3.a.2 Satisficing approach which is used when the optimizing approach
cannot be applied. It consists of a search among the alternative solutions
for any solution that acceptably satisfies desired performance criteria.

3.1.4.3.b. Approaches in an Environment of Uncertainty

Since the environment of uncertainty does not provide sufficient information to assign
probabilities to the future states of nature, the decision approaches are not so refined.
In essence, they can only reflect personal attitudes concerning one's willingness to
accept risk. Any of the following approaches may be used in an environment of
uncertainty:
3.1.4.3.b.1 Maximin approach which involves (1) identifying the worst
outcome (i.e., the minimum) that can occur for any state of nature under
each of the alternative solutions and (2) choosing the alternative with the
greatest (i.e., maximum) worst outcome. This approach aims to attain
"downside" protection to insure survival

3.1.4.3.b.2 Minimax approach which consists of (1) computing the maximum

opportunity loss (i.c., regret) associated with each alternative solution for
every state of nature and (2) computing the alternative solution that
minimizes the maximum summed-up opportunity cost. This approach
reflects an attitude of regret avoidance.

3.1.4.3.b.3 Maximax approach which consists of (1) identifying the best

outcome (i.e., the maximum) that can occur under any state of nature for
each solution alternative and (2) choosing the solution alternative with
the greatest i.e., maximum) "best outcome". This approach reflects an
optimistic attitude of accepting a high degree of risk in order to maximize
the return.

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3.1.4.3.b.4 Rationality approach which assumes that in the absence of

available information, each state of nature has an equal probability of
occurrence. It involves (1) applying these equal probabilities to the
outcome associated with the respective states of nature and (2)
choosing the alternative solution having the highest expected payoff.

3.1.4.3.c. Approaches in a Risk Environment

The probability distributions associated with the potential states of nature is known in
a risk environment. The additional data needed to develop the probability distribution
is obtained from historical reports, marketing studies and other fact-finding
investigations. Approaches for making decision choices in a risk environment are
3.1.4.3.c.1 Expected value calculation which consists of (1) weighting the outcomes
for the states of nature by the probabilities of occurrence, (2) adding up
the weighted outcomes to obtain the expected value of the payoff for
each solution alternative, and (3) choosing the solution alternative
having the maximum expected payoff.
3.1.4.3.c.2 Decision tree approach which provides probabilistic results. This is
suitable to problem situations in which a series of sequential decisions
must be made.
3.1.4.3.c.3 Monte Carlo Simulation approach.
This involves simulating a model usually in the form of a computer
program, over one or more time periods during repeated trials or runs.
The computer model incorporates one or more probability distributions
to represent factors whose values are subject to variability. During each
trial or run, values for the probabilistic factors are selected randomly from
the distributions. The results of the trials are expressed in probabilistic
terms (i.e., expected values and standard deviations), thus producing
information concerning the likely ranges of the payoffs for the respective
solution alternatives. This approach is used in complex situations where
analytical methods cannot be applied
3.1.4.3.c.4 Other risk environment approaches which are probabilistic approaches
based on queuing theory and game theory. These are seldom applied
by managerial decision makers.

3.1.4.4. Detailed Development of the Selected Solution

The selected solution will undergo detailed design and refinement. Its implementation
must be carefully planned in order to minimize required time and costly mistakes.
The design team members should be carefully selected on the basis of their
proficiency in technical design, skill in attaining management involvement and
understanding of the users perspective.
This stage will involve the designing of
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 Outputs
 Inputs
 Conversion processes
 Resource and data bases
 Organization

and employment of sound design and project management techniques.

3.1.4.4.a. Guidelines for Solution Development

The following guidelines will be helpful throughout the solution development
phase. Some of these guidelines have already been noted; others need
attention as this phase is concluded.
3.1.4.4.a.1 The selected solution should be directly related to the
objectives that the client desires to achieve.
3.1.4.4.a.2 Maintain a comprehensive view of the problem situation
and how it relates to the overall organization. Always focus
on the key issues and concerns.
3.1.4.4.a.3 Search for all the important relationships involved in the
situation.
3.1.4.4.a.4 Employ systematic procedures and methodologies while
maintaining an openness to creative insights.

3.1.5. Preparation and Presentation of the Report and Recommended Solution

The next stage in an MAS engagement is to present the recommended solution to
management of the client organization. The recommended solution should be
presented in a persuasive manner if the consultant expects to obtain the client's
acceptance of the recommendation.
What are the desirable aspects of presentation style? Some guidelines in the
presentation of the recommendation are
3.1.5.1. The presentation should normally be made orally and • accomplished by
audio visual aids and a written report.
3.1.5.2. Facts and arguments should be presented in a clear, concise, and
nontechnical manner.
3.1.5.3. Do not overwhelm the client with numerous details and unnecessary
discussion of data analysis techniques.
3.1.5.4. Be ready however to describe briefly the significance of any gathered
fact and the purpose of any technique employed.
3.1.5.5. Volunteer information concerning the risks that a recommended solution
entails and the difficulties that are expected in implementing the solution.
3.1.5.6. Interim presentations and written reports should be made throughout the
solution development phase. As a minimum, these presentations and

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reports should be given to the client at the completion of each step. If the
client management and users have been properly involved and
informed, they could easily understand the final presentation and be
open to the presented findings.

3.1.6. Implementation
An MAS review or study frequently results in recommendations which require the
development and adoption of plans for new programs or systems or the making of
extensive revisions in existing programs or systems. It must be understood that the
CPA should not and cannot take the responsibility for making management and policy
decisions in any MAS engagement. Nor can he exercise absolute administrative
control of client personnel since he is not a member of their organization. The СРА
o Should evaluate the client's capacity to develop and carry out plans for the
recommended program or system and
o May recommend that a client hire additional qualified personnel to perform
some of the many tasks required.

Implementation is the important and lengthy phase that follows the solution
development phase during a problem-solving process.
The implementation phase involves the following activities:
 Development of a work plan
 Establishment of controls over the implementation activities
 Selection and training of needed personnel
 Installation of needed physical facilities
 Development of standard and documentation,
 Testing of the solution being implemented, and
 Follow-up and evaluation of the implemented solution.

These steps are typically performed in the order listed above although their sequence
will vary somewhat from engagement to engagement.

3.1.7. Follow-up Evaluation of the Implemented Solution

A thorough post-implementation evaluation should be conducted shortly after the
solution has been fully implemented. Report should be prepared as written
documentation of the evaluation and presented to management.
An illustration of this evaluation, in the case of an information system, will involve the
following:
 Compare the actual performance of the implemented system with the expected
performance.
 Compare the details of the implemented system with the documented design.
 Determine potential improvements to the new system.

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 Determines means of improving the systems development methodology

employed by the client firm.

An early question that must be resolved concerns who is to conduct the evaluation.
While the implementation team is most familiar with the implemented system, it may
be viewed as biased. Therefore, it is probably better to choose qualified personnel
other than members of the implementation team. Three suitable choices are:
 A special audit team selected from among the managers of the client
organization
 An internal audit team that performs operational reviews as a part of its
customary duties
 An external team of consultants

The follow-up evaluation is not a one-time process. Additional evaluations should be

performed at regular intervals during the operational life of the implemented system.
User needs change over time, and these changes will lead in time to the need for
further improvements via future system development cycles.
Each review and evaluation should focus on three specific areas:
3.1.7.a. Economics
3.1.7.b. Operations
3.1.7.c. Future performance

3.1.7.1. Economic Review

The economic review should involve the comparison of (a) the actual benefits and
costs of the new system with (b) the expected benefits and costs that were developed
during the system design phase. Typical questions that may be asked during an
economic review include:
Were the development cost estimates on target?
Did the expected benefits materialize?
Were the operational costs in line with estimates?
Have significant variances occurred?
The analysis is useful even when immediate results are not likely. For example,
development costs are historical in nature and thus cannot be recovered. By learning
the reasons for variances in development costs, however, client management can
modify the system development and thus reduce development costs in future
implementations.

3.1.7.2. Operational Review

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An operational review focuses on the actual use of the implemented system by the
intended users. Typical questions that might be asked during an operational review
include:
Does the system operate successfully? Has the system solved organizational
problems that it is intended to address? Is the system being used or is it being
resisted? Are the automated and manual processes as efficient as intended?
An evaluation of operations after implementation should consider how well they
function, with particular emphasis (in the case of an information system) on inputs,
error rates, timeliness of outputs, and utilization of outputs. Various evaluation
techniques may be employed. For instance, a report can be terminated for a period of
time in order to determine if it is actually being used. If no one complains, the report is
probably not being used. A performance monitor can be applied, in the case of an
online information system, to determine the use frequency of a particular CRT screen.

3.1.7.3 Future Performance Review

A future performance review identifies potential improvements to the implemented
system and estimates the effort required to implement these improvements. Both
benefits and costs should be considered in this review, just as they were during the
planning of the currently implemented system.
Possible improvements, to be conducted by means of systems maintenance projects,
can be subdivided into short-term attributes and long-term attributes. Client
management can then prioritize the tasks, determining which efforts should be
undertaken immediately and which should be delayed.

4. EVALUATING THE ENGAGEMENT AND POST-ENGAGEMENT FOLLOW-UP

4.1. Evaluation of the Engagement
Evaluation of MAS engagements is necessary if constant improvement and refinement
in the quality of future advisory services is to be achieved. veral benefits may be
realized through an effective formal or informal evaluation program and these are:
 It will provide direction for staff training program in the MAS division.
 It will serve as a basis for evaluating on-the-job performance of staff personnel.
 It will provide data for determining required resources for subsequent similar
engagements.
 It will provide tangible evidence of quality consciousness consistent with the
other areas of a CPA's practice.

The evaluation will formally cover the following:

 Proposal
 Engagement Program
 Work program and schedule

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 Source data and documentation

 Reports
 Results

The AICPA recommends in its Guideline Series No. 1 on MAS the following criteria for
the effective evaluation of the above-mentioned items. These are:
4.1.1. Proposal:
4.1.1.1. Were specific problems with the client encountered which might
not have arisen if the problem area had been adequately covered
in the proposal letter?
4.1.1.2. Did the proposal letter recognize all requirements of firm policy in
establishing the engagement?

4.1.2. Engagement Program:

4.1.2.1. Did additions to or deletions from the planned scope occur during
the engagement? For what reason? Were these changes
approved by responsible client personnel?
4.1.2.2. Is there evidence that the skill level of personnel utilized was not
commensurate with the requirements of the phase to which they
were assigned? If so, specify the indicator, phase, individual and
recommendations for future engagements.
4.1.2.3. Were utilized techniques performed in accordance with firm
policy? What change in techniques would you recommend for a
similar engagement?

4.1.3. Schedule:
4.1.3.1. Did actual duration differ significantly from plan? State your
opinion as to reason(s) for deviation.
4.1.3.2. If dates of interim reports or engagement completion were not in
accordance with prior client agreement, state reason.

4.1.4. Documentation:
4.1.4.1. Were recommendations to the client, oral or written, supported by
adequate evidential matter in the work papers?
4.1.4.2. Are there specific respects in which organization or content of
work papers are not in accordance with minimum standards of the
firm? If so, describe.
4.1.4.3. Was it necessary to do additional work and/or recontact client for
additional information before making a final report? Describe
circumstances.

4.1.5. Reports:

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4.1.5.1. Were progress meetings held with, or interim reports made to the
client? If not, state reason.
4.1.5.2. Did errors of fact occur in interim or final reports?
4.1.5.3. Are there specific changes which you would recommend in report
content, format or style to improve effectiveness?

4.1.6. Results:
Deficiencies in any of the above may or may not have a major impact on the
most important criteria - the results. It is in the evaluation of results that extreme
caution must be observed so that personal views are not allowed to cloud
available objective and quantifiable evidence. The following would seem to be
minimum criteria for results:
4.1.6.1. Were all recommendations accepted by the client? If not, why?
4.1.6.2. What degree of satisfaction was expressed by the client?
4.1.6.3. Describe any phase or circumstance in which dissatisfaction was
expressed (or implied) by the client and the reason.
4.1.6.4. Were additional services, either implementation or a new survey
engagement, requested by the client?

4.2. Post-engagement Follow-up

Sometimes programs and systems appear to operate effectively during the first few
months after implementation but later run into difficulty because of some reasons like
(1) change in operating conditions, (2) design may prove to be faulty, etc. It is therefore
important that the CPA should provide for observation of the programs or systems
installed for a sufficiently long period to uncover deficiencies early and to make the
necessary modifications. Such follow-ups are usually agreed upon with the client
either in their original agreement or in the course of the MS work.

Self-Help: You can also refer to the sources below to help you
further
*Agamata, F. T. (2012). Reviewer in management advisory services. Manila:
GIC Enterprises & Co., Inc.
*Bobadilla, D. (2015). Comprehensie reviewer in management advisory
services. Manila, Philippines: Lares Bookstore.
*Bragg, S. M. (2011). The controller’s function: The work of the managerial
accountant (4th ed.).New Jersey: John Wiley & Sons.
*Cabrera, M. E. (2009). CPA reviewer :Management advisory services (2009
ed.). Manila: GIC Enterprises & Co.
*Cabrera, M.B. (2011). Management consultancy. Philippines: GIC
Enterprises & Co., Inc.

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*Jackson, S. R.(2009). Managerial accounting: A focus on ethical decision

making ( 5th ed). Mason, OH: South – Western Cengage Learning.

Let’s Check
Questions:
1. What are the basic stages of a management consulting engagement?

2. What is an MAS proposal letter? What are the contents of this letter?

3. Give the advantages of preparing a proposal letter.

4. What are the factors that should be considered in setting the fee to be charged
to clients?

5. Define an engagement or work plan.

6. What are the basic contents of an engagement program?

7. What are the data gathering techniques available to a management consultant?

8. Give 5 internal sources of data and the corresponding data that may be
obtained from such.

9. Explain briefly the steps in the problem-solving process.

10. Discuss briefly (at least 5) most commonly used techniques in gathering facts.

11. What are the steps involved in solution development phase of the problem-
solving process?

12. Give two approaches in generating alternative solutions in an environment of

uncertainty.

13. What are the activities in the implementation phase of the problem solving
process?

14. Why is there a need to make an evaluation of the implemented solution?

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15. What is the rationale of conducting a post-engagement follow-up

Let’s Analyze
Questions:
1. An engagement program contains the following except
A. engagement objectives.
B. list of manpower required.
C. description of tasks to be accomplished.
D. amount of fees to be earned for each tangible output completed.

2. The activities involved during the negotiation stage of a consulting engagement

include the following except
A. limited survey to ascertain the problem of the business entity and what is
required to reach a solution.
B. identification of the end product of the assignment.
C. determination and agreement on the role to be performed by the CPA
D. agree on the final fee to be charged for the service of the CPA.

3. The engagement proposal letter generally includes the following except

A. objectives and benefits.
B. personnel who will be assigned as Engagement Team members.
C. scope of the work and role of the consultant.
D. fees and billing arrangement.

4. The objectives of an engagement program include the following except

A. to facilitate time and efficiency control over personnel assigned to the
engagement.
B. to provide a means for arranging, distributing and assigning responsibility
for various segments of an engagement.
C. to provide a means for evaluating whether all segments of the engagement
have in fact been completed.
D. to provide a means of determining exactly how much and when to bill the
client.

5. Which of the following statements is true?

A. In rendering MAS, the CPA does not need the support and cooperation of
the client's executives and employees.
B. Management science involves a problem-solving framework based on
scientific methods and applies mathematical, statistical, and probabilistic
techniques to management problem.
C. The management consultancy work program is never prepared by the client.

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 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

D. MAS engagements usually involve making decisions for the client and
assuming responsibility for the full implementation of the alternative chosen
to solve the entity's problem.

6. The following are the basic steps in the problem solving process:
1. Evaluating the engagement and post-engagement follow-up.
2. Data analysis and diagnosis.
3. Solution selection.
4. Problem identification and definition and desired outcome.
5. Identification of suitable sources of information and data gathering.
6. "Preparation and presentation of the report and recommended solution.

The order in which the above activities should be preferably followed

A. 1, 2, 3, 4, 5, 6.
B. 4, 5, 2, 3, 6, 1.
C. 4, 2, 5,3, 6, 1.
D. 4, 5, 2, 6, 3, 1.

7. The problem definition phase of the problem-solving process begins with the
initial recognition of a symptom pointing to the problem and ends with the
complete problem description. Among the key facets of the problem description
are the following except
A. Identify of the problem.
B. Objectives of the problem.
C. Scope of the problem.
D. Financial costs of the problem to the company.

8. The problem definition phase of the problem-solving process begins with the
initial recognition of a symptom pointing to the problem and ends with the
complete problem description. Among the key facets of the problem description
are the following except
A. Intensity of the problem.
B. Time dimension.
C. Location.
D. Responsibility of creating the problem.

9. The problem definition phase of the problem-solving process begins with the
initial recognition of a symptom pointing to the problem and ends with the
complete problem description. Among the key facets of the problem description
are the following except
A. Human elements involved in the problem.
B. Support system surrounding the problem.
C. Tracking system related to the problem.
D. specific person in charge of managing the problem.

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 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

10. The following pitfalls should be avoided by the consultant in identifying the
problem in a consultancy engagement, except
A. mistaking symptoms for the underlying problem.
B. unqualified acceptance of the opinion of others.
C. measuring the financial loss caused by the problem.
D. overlooking the different and various causes of the problem.

11. The following human-related elements should be identified and assessed in the
statement of the problem except
A. attitude of involved managers and employees.
B. personal traits of involved managers and employees.
C. training of involved managers and employees.
D. age of involved managers and employees.

12. Information about product pricing and costing could be easily made available
by the
A. marketing department.
B. production department.
C. personnel department.
D. accounting department.

13. Information on types of new products or services with market possibilities are
usually provided by the
A. production department.
B. personnel department.
C. accounting department.
D. marketing department.

14. Among the sources of information that the consultant could avail of are external
sources. Information about market conditions could best be provided by
A. industry reports.
B. database retrieval systems.
C. customers.
D. distributors.

15. Which of the following is generally not considered an effective technique of

gathering facts?
A. Interviews
B. Questionnaires
C. Observation
D. Cutoff procedure

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 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

16. Solution development phase of the problem-solving process involves the

following steps (Part II)
1. Detailed development of the selected solution.
2. Choice of the preferred solution alternative.
3. Evaluation of solution alternative.
4. Generation of solution alternative.
In what order should the above-listed activities be performed?
A. 1, 2, 3, 4
B. 4,3,2,1
C. 2,1,3,4
D. 4,3,1,2 Part II

17. The following can generally conduct a post-implementation evaluation except

A. special audit team selected from among the managers of the client
organization. (Part II)
B. an internal audit team.
C. external team of consultants.
D. independent external audit team. Part II

18. In conducting a post-engagement follow-up, the following areas will be covered

except (Part II)
A. proposal
B. engagement program.
C. source data.
D. fee earned on each important part of the engagement. Part II

In a Nutshell
Question:
Based on the topics discussed in this ULO, state what you have learned from this
lesson.

I have learned that …

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 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

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Q&A Lists
Do you have any questions?
Questions/ Issues Answers
1.
2.
3.

Keyword Index

Association Delphi approach.

Brainstorming. Detail flowchart.
Categorization Document Gathering
Causation Engagement program or work plan
Charting External Sources
Classification Internal Sources
Correlation Interviews
Data flow diagram Maximin approach
Decision table Minimax approach
Decision tree approach Rationality approach

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