Objectives, role and scope of management accounting

Management consulting, often referred to as business consulting, is defined as “advisory and/or implementation
services to the (senior) management of organizations with the aim of improving the effectiveness of their business
strategy, organizational performance and operational processes.”

Management consultant – a person who is qualified by education, experience, technical ability, and temperament to
advise or assist businessmen on a professional basis in identifying, defining, and solving specific management problems
involving the organization, planning, direction, and operation of the firm.

Historical Development

Audit Process – Planning, Walkthroughs, Controls Testing, Substantive Procedures, Finalization.

Management Letter Comments

Auditors often issue MLs as a byproduct of financial statement audits in both the private and public sectors. The primary
purpose of MLs is to provide suggestions (“comments”) on improving auditee financial management, internal controls,
and/or operations.

Management Accounting, Cost Accounting, and Financial Accounting

Management Accounting Cost Accounting Financial Accounting

End user Management Management and various Various stakeholders
stakeholders
Frequency Frequently, depending on As frequent as management Annual or depending on rules
management needs accounting and regulations
Focus on reports Reports depend on Either historical reports or Reports are limited to financial
management needs; future future reports (i.e. aspect (in the form of financial
oriented forecasted costs), or both statements), it focuses on
historical data
Regulation Optional and not regulated Required to follow pertinent Required by various
standards, but cost data is government agencies and is
not really regulated regulated
Type of Accounting Unrestricted Unrestricted Restricted
System
Measurement Not limited to monetary Not limited to monetary Limited to monetary value
value value (historical peso value)

Cost Accounting is a subset of both management and financial accounting.

Characteristics of MAS

1. Services are rendered for the management rather than for third parties
2. Involves problem solving
3. Relates to the future
4. Broad in scope
5. Involves varied assignments
6. Engagements are usually non-recurring
7. Engagements require highly qualified staff
8. Human relations play a vital role in each engagement

AICPA’s first statement on MAS:

“The role of an independent accounting firm (or consultant) in performing Management Advisory Services is to provide
advice and technical assistance, and should provide for client participation in the analytical approach and process.
Specifying this as the proper role recognizes both the appropriate place of management advisory services and the
realities of practice. This is the only basis on which work should be done, and it is the only basis on which the work
should be done, and it is the only basis on which responsible management should permit it to be done.”

MAS Practice Standards

1. Personal Characteristics
2. Competence
3. Due Professional Care
4. Client Benefit
5. Understanding with client
6. Planning, Supervision, and Control
7. Sufficient Relevant Data
8. Communication of Results

Controller and Treasurer

Controller Treasurer

1. Planning and control 1. Provision of capital

2. Reporting and interpreting 2. Investor relations
3. Evaluating and consulting 3. Short-term financing
4. Tax administration 4. Breaking and custody
5. Government reporting 5. Credit and collections
6. Protection of assets 6. Investments
7. Economic appraisal 7. Insurance

International certification in management accounting

1. Chartered Certified Accountant (ACCA) designation

The Chartered Certified Accountant (ACCA) designation is a globally recognized accounting certification that
focuses on topics such as financial management, reporting, taxation, auditing, leadership, and ethics.
Unlike the CPA, ACCA is more internationally recognized and applicable as it focuses on IFRS as opposed to
U.S. GAAP. However, this means that ACCA is less appropriate in the United States.

2. Certified Financial Planner (CFP®) designation

The Certified Financial Planner (CFP) designation is a great finance certification for anyone who is pursuing a
career in investment or wealth management. This certification is focused on financial planning – the high net
worth and retail segment of investment management. Though the CFP’s coverage of wealth management is
extensive, its focus is narrow, thus making it not as applicable to other finance careers.

3. Certified Management Accountant (CMA®) certification

The Certified Management Accountant (CMA) certification is an accounting certification that is offered by the
Institute of Management Accountants. The CMA looks further into financial accounting and mixes in
elements of strategic management. The certification is concerned with teaching the underlying factors behind
a company’s financials and what strategic business decisions can be derived from them.

4. Certified Public Accountant (CPA) certification (Other states)

The Certified Public Accountant (CPA) certification is one of the most important certifications for accountants
and is also significant for a finance career path. The CPA program covers topics such as auditing, attestation,
financial accounting and reporting, business environment and concepts, as well as regulation.

5. Chartered Alternative Investment Analyst (CAIA®) designation

The Chartered Alternative Investment Analyst (CAIA) designation is a finance certification which focuses on
alternative investments. This finance certification is aimed at people who want to work in asset management
and hedge fund industries. CAIA primarily covers topics such as hedge funds, private equity, real assets,
asset allocation, structured products, risk management, and ethics. While not as versatile as other
designations, the CAIA is very useful for niche areas of finance, specifically for managing alternative
investments like real assets.

6. Chartered Financial Analyst (CFA®) designation

 The main focus of the CFA is portfolio management and investment analysis. The designation covers topics
such as ethics, quantitative methods, economics, financial reporting and analysis, equity, fixed income, portfolio
management, derivatives, and alternative investments.

7. Chartered Financial Consultant (ChFC®) designation

The Chartered Financial Consultant (ChFC) designation is a finance certification that is awarded by The
American College of Financial Services. The ChFC includes comprehensive coverage of all kinds of financial
planning topics, such as insurance planning, income tax planning, and retirement planning. Unlike the
CFP, which has a final exam at the end of the program, the ChFC includes exams at the end of each course.

8. Chartered Global Management Accountant (CGMA®) designation

The Chartered Global Management Accountant (CGMA) designation was jointly established by the American
Institute of Certified Public Accountants (AICPA) and the Chartered Institute of Management Accountants
(CIMA). It is a globally recognized accounting certification that has been established by two of the longest
standing accounting associations. If you are a current CIMA member, you automatically qualify for a CGMA and
if you are a current voting AICPA member, you have the option of a faster route to obtaining the designation.

The CGMA focuses on topics such as financial and management accounting, reporting, and strategy.
There are three levels in the CGMA, each consisting of three courses which have their own exam. In addition,
a case study exam must be completed at the end of each level. Thus, the CGMA has a total of 12 exams.

9. Financial Modeling and Valuation Analyst (FMVA™) certification

The Financial Modeling and Valuation Analyst (FMVA) certification is a finance certification that is offered by
Corporate Finance Institute®. The FMVA is a popular option for corporate finance professionals what want to
improve their financial modeling skills. The FMVA is built on practical topics and applications, using real-world
examples and case studies. The curriculum of the FMVA includes topics such as finance theory, advanced
Excel skills, how to build financial models, advanced valuation techniques, and sensitivity analysis. Additionally,
the FMVA focuses on teaching students using the best practices of the Analyst Trifecta®. This program focuses
on more than just financial theory and analytics. By also teaching soft skills and presentation skills, the FMVA
prepares you for all stages of any task or project that you will work on as a financial analyst.

10. Financial Risk Manager (FRM®) certification

The Financial Risk Manager (FRM) certification is offered by the Global Association of Risk Professionals
(GARP). The FRM is designed for finance professionals looking for careers as risk analysts, risk officers, or
other positions in risk management. The topics covered by the FRM revolve around risk management, such
as valuation and risk models, credit risk measurement, and operational risk management.

Global trends in management accounting

1. Expansion from product to channel and customer profitability analysis

2. Management accounting’s expanding role with enterprise performance management (EPM)
3. The shift to predictive accounting
4. Business analytics embedded in EPM methods
5. Coexisting and improved management accounting methods
6. Managing information technology and shared services as a business
7. The need for better skills and competency with behavioral cost management
8. The concepts and methods in the field of strategic management accounting should be further developed to
assist decision-making process oriented towards achieving the fundamental, strategic objectives of companies.
New methods to strengthen the role of accounting in the process of strategic management (strategic planning,
strategy execution, and strategy control) should be developed.
9. Models of comprehensive cost accounting and cost management systems instead of separate costing systems
should be designed and implemented.
10. Integration of different methods of management accounting.
11. Developing managerial accounting methods taking into account the requirements and impact from the
organizational structures and complex information needs.
12. Management accounting will be further oriented towards the management of intellectual capital.
13. Development of integrated, tailor-made models and concepts of performance measurement and performance
management.
Sources:

Roque, Rodelio. Management Advisory Services. Roque Press, Inc., 2016

Cokins, Gary. Strategic Finance. 2016

https://www.managementstudyguide.com/management_functions.htm

Institute of Management Accountants

https://corporatefinanceinstitute.com/resources/careers/designations/top-10-accounting-finance-certifications/

J. Bugatan / J. Saripada