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MAS – LECTURE NOTES ARMIN GLENN ARANETA,CPA

OVERVIEW OF THE MAS PRACTICE BY CPAS

MANAGEMENT ADVISORY SERVICES – refers to that area of accounting work concerned with providing
advice and technical assistance to help clients improve the use of their resources to achieve their goals.

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, control, and operation of the
firm.

FACTORS FOR THE EMERGENCE AND GROWTH OF MS CONSULTANCY

1. Growth in size and complexity of business firms.
2. Complexities in managing and conducting a business.
3. Lack of competent staff.
4. Trend towards industrialization.
5. Need for adequate and timely information in management decision-making.
6. Development of techniques for the solution of management problems, and businessman’s awareness of
their usefulness.

REASONS FOR HIRING MANAGEMENT CONSULTANTS

a. Help define specific problems and develop solutions.
b. Provide specialized skills and experience.
c. Provide confidential service in which the identity of the client is concealed.
d. Train client personnel.
e. Help improve intra-company communications.
f. Render an independent opinion.
g. Help get results.

MAS BY CPAs --- CPAs performing management consulting and other advisory services are considered in the
practice of professional accounting and are bound by the Code of Ethics for Professional Accountants.

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.

SCOPE OF MAS

MAS are usually related to the services rendered by CPAs in the areas of auditing, tax, and accounting, and may
involve activities such as:
 Counseling management in its analysis, planning, organizing, operating, and controlling functions;
 Reviewing and suggesting improvement in policies, procedures, systems, methods, and organizational
relationships;
 Introducing new ideas, concepts, and methods to management; and
 Conducting special studies, proposing plans and programs, and providing guidance and technical
assistance in their implementation.

BROAD AREAS OF MAS

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A. AREAS NORMALLY RELATED TO THE ACCOUNTING AND FINANCE FUNCTIONS:

1. Financial Accounting Systems Design and Development
2. Management Accounting Systems Design and Development
3. Development and Establishment of Budgetary Control

The field covers the following:

1. Cost Accounting
2. Financial Management

B. AREAS NOT NORMALLY RELATED TO THE ACCOUNTING AND FINANCE

FUNCTIONS:
1. General Management Consultation
2. Project Feasibility Studies
3. Organization and Personnel
4. Industrial Engineering
5. Marketing
6. Operations Research

ADVANTAGES OF CPA’S OVER OTHER PROFESSIONALS IN MAS PRACTICE

 They are already familiar with the client and his business, and enjoy the client’s confidence.
 They are members of a profession with recognized standing and are equipped with technical know-how
in accounting and taxation.

3 BROAD STAGES
1. Analysis Stage
2. Design Stage
3. Implementation Stage

MAS PRACTICE STANDARDS

 All CPAs engaged in MAS practice should observe a set of MAS Practice Standards, which are
classified into general and technical standards. These are as follows:

GENERAL STANDARDS
1. PROFESSIONAL COMPETENCE
2. DUE PROFESSIONAL CARE
3. PLANNING AND SUPERVISION
4. SUFFICIENT RELEVANT DATA
5. FORECASTS

TECHNICAL STANDARDS

1. ROLE OF MAS PRACTITIONER – the practitioner should not assume the role of management or
take any position which may impair the practitioner’s objectivity in performing an engagement.

2. UNDERSTANDING WITH THE CLIENT – a written or oral understanding should be reached with
the client concerning the nature, scope, and limitations of the engagements to be performed.

3. CLIENT BENEFIT – the MAS practitioner should obtain an understanding of the possible benefits the
client wishes to achieve from the engagement before beginning the work.

4. COMMUNICATION OF RESULTS – the MAS practitioner should communicate to the client his
principal findings, conclusions, recommendations, or other results of the engagements, including major
facts and assumptions used, limitations, reservations, or other qualifications.

STAGES IN MAS ENGAGEMENTS

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1. Negotiating the engagement.

2. Preparing for and starting the engagement.
3. Conducting the engagement.
4. Preparing and presenting the reports and recommendations.
5. Implementing the recommendations.
6. Evaluating the engagements.
7. Post engagement follow-up.

MANAGEMENT ACCOUNTING VS. FINANCIAL ACCOUNTING

MANAGEMENT ACCOUNTING FINANCIAL ACCOUNTING

Internal users: officers and External users: stockholders, creditors,
USERS OF REPORT
managers concerned government agencies
To provide internal users with To provide external users with
information that may be used by information about the organization’s
managers in carrying out the financial position and results of
PURPOSE
functions of planning, controlling, operations.
decision-making, and performance
evaluation.
Different types of reports, such as Primarily financial statements and the
budgets, financial projections, cost accompanying notes to such
TYPES OF REPORTS
analysis, etc., depending on the statements.
specific needs of management.
In preparing reports, the Reports are prepared in accordance
STANDARDS OF management of a company can set with generally accepted accounting
PRESESNTATION rules to produce information most principles and other pronouncements
relevant to its specific needs. of authoritative accounting bodies.
Focus on reports is on the Financial reports relate to the business
company’s value chain, such as as a whole.
REPORTING ENTITY
business segment, product-line,
supplier, or customer.
Reports may cover any time period- Reports usually cover a year, quarter
year, quarter, month, week, day, etc. or month.
PERIOD COVERED
Reports may be required as
frequently as needed.

“Lack of loyalty is one of the major causes of failure in every walk of life.”
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