&) ReSQ-The Review School of lccowrtancg : Monegemert Udrisory Services MAS-B: MANAGEMENT ADVISORY SERVICES (MAS) MAS ~ refers to the consulting services performed by Certified Public Accountants (CPAs) and other financial advisors to improve client's use of its capabilities and resources to achieve business objectives. CHARACTERISTICS OF MAS ENGAGEMENTS ‘+ Broad in scope Involves problem solving Involves varied assignments Engagements are usually non-recurring Relates to the future (i.e., forward looking) Engagements usually require highly qualified staff Human relations play a vital role in each engagement Services are rendered for the management that is usually a third-party client BROAD STAGES IN MAS ENGAGEMENTS 1) ANALYSIS STAGE - involves determining facts and circumstances, identifying objectives, and defining the problem or opportunity for improvement 2) DESIGN STAGE - involves evaluating possible solutions, communicating findings and presenting recommendations. 3) IMPLEMENTATION STAGE - involves scheduling actions and providing technical assistance in the implementation of the reconimendations. (NOTE: to maintain independence, the business advisor shall NOT implement the recommendations but provide technical assistance only in the implementation. SPECIFIC STAGES IN MAS ENGAGEMENT Negotiating the engagement Preparing for and starting the engagement Conducting the engagement Preparing and presenting the reports and recornmendations Implementing the recommendations Evaluating the engagement Post engagement follow-up MANAGEMENT CONSULTANT - refers to a person who Is qualified by education, experience, technical expertise to advise and assist businessmen on a professional basis in Identifying and solving specific management problems regarding business. operations. REASONS FOR HIRING MANAGEMENT CONSULTANTS soe consultant is considered independent, objective and detached to the problems of the organization TR Consultant possesses special knowledge and skills that are not normally available from company personnel. «Re CSnsultant serves as a catalyst for much needed changes that are not normally perceived by company personnel. + Tnvcertain business situations, hiring consultants are less expensive than hiring full-time managers FACTORS FOR THE EMERGENCE & GROWTH OF MANAGEMENT CONSULTANCY ‘+ Lack of competent staff Trend towards industrialization Growth in size and complexities of business firm Complexities in managing and conducting a business Emergence of new management solutions and teriniques Need for adequate and timely information for management decision-making DOCUMENTS USED TO FORMALIZE MANAGEMENT CONSULTANCIES & MAS ENGAGEMENTS CONTRACT ~ a legal document often prepared by the client, incorporating a proposal letter or engagement letter prepared by the business advisor. «PROPOSAL LETTER - an offer of service which, if accepted and approved by the cent, becomes & contractual agreement + ENGAGEMENT LETTER ~ a contractual agreement used when the client has already agreed that the business advisor will conduct the engagement. = CONFIRMATION LETTER ~ a brief and concise statement of agreement previously reached with a client. Page 1 of 4 pagesRSQ The Rerrew School of Geconect 7 MANAGEMENT ADVISORY SERVICES, ~? mas ° MANAGEMENT ADVISORY SERVICES by CPAs push@hagement consultancy ts not limited to CPAs. However, CPAS have distinct advantages over other usiness advisors as they are already familiar with the ctent and its business, and they enjoy the client's confidence; CPAs are members of a profession with recognized standing ond equipped with technical know-how wunting and taxation. In CPA firms, MAS departments are kept iniependent from other departments like ‘audit and tax. ESSENTIAL ATTRIBUTES THAT MAKE A CPA QUALIFIEL TO RENDER MAS, + Tectinical competence + Professional independence, objectivity and integrity + Analytical ability and experience in solving business problems + Familiarity with the client's finance, control systems and business problems SCOPE OF MAS BY CPAS ‘MAS engagements are usually connected with the services rendered by CPAs in the areas of auditing, tax, and accounting, and may Involve activities such as. + Introducing new ideas, concepts, and methocs te management + Counseling management in its analysis, planning, organizing, operating and controling functions. + Reviewing and suggesting improvement of policies, procedures, systems, methods, and organizational relationships. + Conducting special studies, proposing plans and programs, and providing guidance and technical assistance in their implementation, TYPES OF CLIENTS SERVED BY CPAs IN MAS ENGAGEMENTS, + Private-owned business firms + Professional associations or organizations + Governmental agencies and organizations + Not-for-profit nongovernmental organizations + Others organizations like labor unions and religious groups VARIOUS TYPES OF MANAGEMENT ADVISORY SERVICES BY CPAS ‘= Management Accounting-Related Services ‘This involves providing assistance to management related to planning and controlling business well as decision-making. (Examples: cost reduction studies, cost accounting systems, operations as ‘analysis and responsibility accounting) financial statement analysis, budgeting, variance + Financial Management-Related Services This involves the study of working capital an xd long-term capital requirements as well as study of capital investment proposals. (Examples: capital budgeting, working capital analysis and management, study on cost of capitat and optimal capital structure) + Design and Appraisal of Accounting System ystem for a newly organized firm or the revision, ‘This involves development of an accounting sy partial or complete, of an existing accounting system. (Examples Sccounting software selection and implementation. + Global-Risk Management Solutions aoe ewolves managing the totality of risks - financial, operational and systems -- and over-all strategy to improve financial and business performance. (Examples: financial risk management: srete8Y ek management, systems risk management, compliance risk management and internal audit services) + Transaction Services Macon aives services related to mergers, acquisition, divestitures, joint ventures and strategic allan. texamples: due diligence services to uncover potential nancial and strategic rsks and rewards) + Other Services: Project feasibility studies Financial advisory services ‘Operations research (quan Industrial engineering Project finance and privatization Valuation services Business recovery services Dispute analysis and investigations ‘Computer risk management ‘Organization and personnel General management Marketing consultation systems engagement and titative methods) vey YY Page 2 of 4 pages &RSA. (he Review Shoot of lecommtocrey, MAS-B MANAGEMENT ADVISORY SERVICES MAS PRACTICE STANDARDS CPAS performing management consulting and other advisory services are considered in the practice of accountancy and are bound by the Code of Etnies for Professional Accountants, Consider the following MAS Practice Standards: 1 Personal Characteristics in performing MAS, a practitioner must act with integrity and objectivity and be independent in mental attitude Competence ~ engagements are to be performed by a practitioner having competence in the analytical approach and process, aid in the technical subject matter under consideration. vent Benefit -a practitioner should notify the chent, before accepting the engagement, of any x reservations he may have concerning the realization of the anticipated benefits. 4. Due Professional Care - the MAS practitioner shat! excreise due professional care by observing rules and regulations applicable to specific MAS engagements. 5. Understanding with Chent ~ before undertaking the engagement, a practitioner is to inform his client of all significant matters related to the engagement ©. Planning & Supervision - the MAS practitioner shail adequately plan and supervise an engagement in 3 manner that provides reasonable assurance that the work is conducted in accordance with the under professional standards and rules of conduct. 7. Sufficient Relevant Data - sufficient relevant data are to be obtained, documented and evaluated in developing conclusions and recommendations. Communication of Results - all significant matters relating to the result of the engagement (e.9., principal findings, rejor facts and assumptions used) are to be communicated to the cle MULTIPLE-CHOICE QUESTIONS (with suggested answers) 1. What is the primary purpose of Management Advisory Services? > 2. To help ctients wentify their problems b. To nelp chents maximize their resources ¢. To reach and service more potential clients by the CPA firm To improve the chent’s use of its capabilities and resources to achieve business objectives 2. Which of the following is NOT a charactenstic of Management Advisory Services (MAS)? c 3. MAS is Droad in scope b. Beneficiary of service 1s management c_ MAS 1s repetitive as far as the same chent ss concerned G.MAS involves problem-solving affecting future operations of the client 3. Which of the following is NOT a qualification of @ CPA in MAS practice? A a. Auditor of the client b. Anaiytical experience in probiem solving c._ Professional independence, objectivity and integnty d. Familianty with the chent's financial accounting and internal control systems 4. Which of the following statements is true? 12. Strict adherence to generally accepted accounting principles in MAS 1s required BL Ina management services engagement, the independent CPA renders technical advice CA non-CPA is prombited under the revised acrountancy law to engage in professional management advisory services practice 6. A CPA in management services engagement may take position that would impair its independence if the client 1s not his audit client concurrently 5. Which of the folowing ts NOT an area in MAS practice? 8 ‘2. Conducting speciat studies 7 b. Marketing and public relations work Introducing new ideas, concepts and methods §. Reviewing and suggesting improvement of rolicies, procedures, systems and methods 6. Management Services of CPAs cover all the following, EXCEPT Project feasibility study ¢ System design and implementation ‘Audit, tax and legal services 4. Organizational development and planning ssctance to management in relation to planning, » > 7. The MAS engagement that volves providing 3s: controlling and decision making, 8 ‘2. Financial management Management accounting 8. This engagement involves the review of complance with regulatory requirement and Taxation 4. financial accounting ethical conduct standards. ° ‘a Strategic risk management Operational and systems risk management b. Finanual risk management 6. Compliance risk management 9 These involve services related to mergers, acquisitions, divestitures, joint ventures, spin-off and strategic aikance 8 ‘a. Strategic risk management © Comphance ask management Due diigence audit Financial risk management Page 3 of 4 pages & oRe. the 8 10. Kevvew School of Aeon MANAGEMENT ADVISORY SERVICES Managerent consultancy Is limited to CPAs 6 Can be practiced by anybaay 1s 908 Himited to CPAs 0. be exchisive to the CPA profession Most definitions of ‘consultancy! would include services related to the following, FxCERT 4, Information technology Lagat advisory Corporate strategy Systems and operations management 14 16. 7 18, 19. 20. «NOT common reason for hiring a management consultant? lependent opinion ed skills and experience ve as a Catalyst for needed changes i the workplace inatters on behalf of the cent 4. To implement solutions and decide on busine: 1 an offer of service which, W accepied and approved by the client, becomes a contractual agreement ® Contract 6. Engagement letter b. Confirmation tetter 4d. Progosal letter The engagement letter generally includes the following, EXCEPT a, Objectives and benefits b. Fees and billing arrangement ¢. Scope of the work and rate of the consultant 4. Personnel who will be assigned to the engagement tear The MOST important factor in selecting an engagement team With prior experience in the client's ind b. With a combination of skills and experienc as in different industries fc. With the appropniat client's problems, 4. Who are likely to employ different approaches to pr imaginative thinking, or unusual skill in the interpretat statistical data to assign consultants in various business functional areas 3% well nd types of thinking to deal effectively with the yroblem solving, such as highly tion and use of financial and # competence of management Factors that must be considered when defining the target level of consultants include the following, EXCEPT "a. Scope of practice area Service variety b. Client requirement 6 fnvestinent required The following are considered in determining the scope of services that a CPA may perform, EXCEPT ‘a. Independence ‘¢ Requirement for specialization b. Competence Range of fees that the CPA will earn ‘As a business consultant, the CPA practitioner should 3. “Encourage dependence of client on the consultant's staff so as to pinpoint clear responsibility in implementing systems. b. Exercise administrative control over the client implementation. c. Not take responsibilty for making decisions and nolicy judgments in MAS engagements, G. Conduct his engagement as if he 1s a member of tne client's organization Which of the following statements is NOT accentahie? ACPA provides consulting services to er) existing audit client a. ACPA offers and provides consulting services to two major competing clients DA Spa shares with a new client substantial information regarding another client belonging to same industry 4, eea'tepresents three major players in rationalizing the industry's incentives before the government public hearings A mangement advisory services engagement generally involves, the following actviies ia what A mleslar order? (NOTE: this question was given/asked in the 1996 CPA Licensure Examinations) 1. Post engagement follow-up 11, . Implementing the recommendation Ii, Conducting the engaaenient IV. Negotiating the engagenvent 'V. Preparing for and sterting the engagement VI. Evaluating the engagement Vil, Preparing and presenting the report and recommendation W's staff to avoid unnecessary delays in VILVIV,1V 111,11 and 1 TH IV,V,.VLVILI and I IVAILV,VEIL,VIL and 1 IV,VIIEVIL,11,VE and T acces Page 4 oi 4 pages ©