Chapter 1: 2.

Fact-finding
Introduction to Management Science (Management 3. Definition of the problems or opportunities
4. Evaluation of alternatives
Accounting) 5. Communication of results
A Sub-topic of Management Advisory Services
6. Implementation
7. Follow-up or monitoring
Chapter Objectives:
This chapter should enable you to know and understand:  Consulting Services- professional services that employ the
 The nature, scope and importance of Management Science as practitioner’s technical skills, education, experience and
a sub-topic of Management Advisory Services. knowledge of the consulting process. These services include:
 The professional qualification and opportunities in MAS a. Consultations
practice. b. Advisory services
 How to organize and manage a MAS Practice. c. Implementation services
 The stages of MAS Engagements. d. Transaction services
e. Staff and other Support services
 What is Management Science? f. Product Services
It is an approach to managerial decision making based on the
scientific method, makes extensive use of quantitative analysis. or Factors for the Emergence and Growth of MS Consultancy
The application of the scientific method to the analysis and 1. Growth and size of business firms
solution of managerial decision problems. 2. Complexities in managing and conducting a business
3. Lack of competent staff
 What is Management Advisory Services? 4. Trend towards industrialization
Management Advisory Services refers to that area of 5. Need for adequate and timely information in management
accounting work concerned with providing advice and technical decision-making
assistance to help clients improve the use of their resources to 6. Development of techniques for the solution of management
achieve their goals. problems and businessmen’s awareness of their usefulness.

 Management Consultant Reasons for Hiring Management Consultants:

A person who is qualified by education, experience, technical a. Help define specific problems and develop solutions.
ability, and temperament on a professional basis in identifying, b. Provide specialized skills and experience.
defining and solving specific management problems involving the c. Provide confidential service in which the identity of the client is
organization, planning, direction, control and operation of the concealed.
firm. d. Train client personnel.
e. Help improve intra-company communications.
 Consulting Process f. Render an independent opinion.
The analytical approach and process applied in a consulting g. Help get results.
service.
MAS by CPAs
Activities involved in Consulting Process:
1. Determination of client objectives
CPAs performing management consulting and other advisory services 1. General Management Consultations
are considered in the practice of professional accounting and are 2. Project Feasibility Studies
bound by the Code of Ethics for Professional Accountants. 3. Organization and Personnel
4. Industrial Engineering
Characteristics of MAS: 5. Marketing
1. Services are rendered for the management rather than for 6. Operations Research
third parties.
2. Involves problem-solving. The services listed above are not necessarily exhaustive nor
3. Relates to the future. complete. The practitioner may offer other services not mentioned
4. Broad in scope. above depending on the practitioner’s competence, experience,
5. Involves varied assignments. technical ability and professional integrity to meet or deliver such
6. Engagements are usually non-recurring. other services he offers.
7. Engagements require highly qualified staff.
8. Human relations play a vital role in each engagement. MAS CLASSIFICATIONS BASED ON REQUIRED EXPERTISE:
1. USUAL SERVICES:
Scope of MAS a. Evaluation of form of business organization.
MAS are usually related to the services rendered by CPAs in the areas b. Analysis of financial and operating statements
of auditing, tax and accounting and may involve activities such as: c. Design and installation of accounting systems.
 Counseling management in its analysis, planning, d. Designs of filing systems for storing accounting records.
organizing, operating and controlling functions; e. Suggestions for improvements in internal control.
 Reviewing and suggesting improvement in policies, 2. SOMEWHAT SPECIALIZED SERVICES:
procedures, systems, methods, and organizational a. Assisting in the installation of a mechanical accounting
relationships; system.
 Introducing new ideas, concepts and methods to b. Making a cost analysis of operations.
management; and c. Advising on various wage incentive plans
 Conducting special studies, proposing plans and programs, d. Preparing an analysis of paper flow.
and providing guidance and technical assistance in their e. Surveying credit losses.
implementation. 3. HIGHLY SPCIALIZED SERVICES
a. Reviewing the organization structure
BROAD AREAS OF MAS b. Auditing management policies
A. Areas normally related to the Accounting and Finance c. Conducting motion studies
Functions: d. Preparing market analysis
1. Financial Accounting Systems Design and Development
2. Management Accounting Systems Design and Advantages of CPAs over other Professionals in MAS Practice
Development - They are highly familiar with the client and his business and
3. Development and Establishment of Budgetary controls enjoy the client’s confidence.
The field covers cost accounting and financial management. - They are members of a profession with recognized standing
and are equipped with technical know-hoe in accounting and
1. Areas NOT normally related to the Accounting and Finance taxation.
Functions:
Analytical Approach and Process CONSULTANT: to respond as practicable at the moment and
 Analysis Stage express the basis for the
1. Ascertaining the pertinent facts and circumstances response.
2. Seeking and identifying objectives
3. Defining the problem or opportunity for improvement MAS PRACTICE STANDARDS
 Design Stage All CPAs engaged in MAS practice should observe a set of MAS
4. Evaluating and determining possible solutions Practice Standards, which are classified into general and technical
5. Presenting findings and recommendations standards. These practice standards are as follows:
GENERAL STANDARDS
In case the client requests the consultant to proceed, the latter may 1. Professional Competence
also be involved in: 2. Due Professional Care
 Implementation Stage 3. Planning and supervision
6. Planning and scheduling actions 4. Sufficient Relevant Data
7. Advising and providing technical assistance in implementing 5. Forecasts
TECHNIICAL STANDARDS
Role of Consultants and Clients in MAS Engagements: 1. Role of MAS practitioner
 In Full Scope Engagements 2. Understanding with the client
These cover all the seven (7) phases in the analytical process. 3. Client benefit
CONSULTANT: limited to that of an advisor, in the 4. Communication of results
implementation stage, his role is merely to
provide technical assistance. Stages in MAS Engagements:
1. Negotiating the engagement (Pre-engagement considerations)
 In Special Study Engagements 2. Preparing for and starting the engagement (Engagement
The client seeks only an impartial and objective study of a Planning)
case and the resulting recommendations. These involve only the 3. Conducting the engagement
first 5 stages in the analytical process. 4. Preparing and presenting the reports and recommendations
CONSULTANT: to proceed through first five phases of the 5. Implementing the recommendations
analytical process, apply (3-5 Engagement management and execution)
objective judgment to the facts and present findings 6. Evaluating the engagement
and recommendations to the client for decision and 7. Post engagement follow-up
further action, (6-7 Engagement conclusion)
CLIENT: to supply pertinent information and to make decision
on the case. Any action -End of Discussion-
beyond the point of decision is solely the
responsibility of the client.

 In Informal Advice
Its structure is informal and no presumption should exist that
an extensive study has been performed.