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Management Advisory Services (MAS) refers to that practice of accounting concerned with
providing advice and technical assistance to help management improve the use of resources in
achieving organizational goals.
The Certified Public Accountant who practices MAS work is called an advisor or consultant.
However, management consultancy is not limited to Certified Public Accountants. Any
professional may practice the same, as long as he has the required competence, experience and
technical ability to solve business problems.
The manager serves as the MAS client.
Factors attributed to the Emergence and Growth of Management Consultancy/MAS:
1.
Growth in size and complexity in business firms
2.
Complexities in managing and conducting a business
3.
Lack of competent staf
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 the
businessmen’s awareness of their usefulness
Reasons for hiring Management Consultants:
1. Help define specific problems and develop solutions;
2. Provide the specialized skills and experience;
3. Provide confidential service in which the identity of the client is concealed;
4. Train client personnel;
5. Provide temporary personnel;
6. Help improve intra-company communications
7. Render an independent opinion and
8. Help get results.
HISTORICAL DEVELOPMENT
The emergence of Management Advisory Services resulted from the CPA’s responding to
the demands of clients, and not by any concerted efort by such practitioners. MAS practice
actually stemmed from the CPA’s audit practice. In the course of audit, CPAs may observe
various information which may be symptomatic of illness or weaknesses of client’s organization.
Such symptoms maybe about overt symptoms that are easy to perceive, call the attention to
and/or remedy and may be simply covered in the CPA’s usual letter to management prepared at
the completion of audit. However, there are more difficult symptoms that may be noted, the
covert symptoms, which need a more detailed study and a logical extension of the CPA’s
services. This extension falls under the practice of Management Advisory Services.
EVOLUTION OF MAS IN THE PHILIPPINES
Substantial interest in the field of Management Advisory Services emerged in the
Philippines with the passage of Republic Act 5166, (also known as Accountancy Act of 1967),
which provided for the inclusion of MAS among the subjects in the CPA Board Examinations. This
act describes the coverage of Management Advisory Services as principles and procedures
involved in management consulting services that may be rendered by CPAs like system
installation, budget/forecast preparation, project studies and controllership.
This act was superseded in 1975 by PD 692, or the Revised Accountancy Law which
likewise provided for the inclusion of MS among the Board examination subjects and described its
coverage involved in management consulting services such as management accounting,
planning and control operations, design and appraisal of accounting systems and financial
management related services.
NATURE AND SCOPE OF MAS
MAS, as defined, is the function of providing professional advisory (consulting) services. The
genesis of MAS is traceable to the traditional CPA services of auditing, tax and financial
accounting. As an extension to these traditional services, CPAs may also be involved in activities
such as:
2. Somewhat Specialized Services. These are the extensions of the usual accounting
work and require additional training and/or experience:
a. Assisting in the installation of a mechanized accounting systems:
Designing forms
Integrating the machine system with the regular system of
accounts
b. Making a cost analysis of operations
c. Finding sources of capital and figuring the approximate cost
d. Giving advice on dividend policy and plans for expansion
e. Calculations on government contracts and allocating costs in compliance with
reporting requirements
f. Advising on accounting and tax matters relative to estate planning in
cooperation with legal and insurance counsel
g. Surveying credit losses
h. Assisting in bankruptcy and receivership proceedings
i. Recruiting accounting or bookkeeping personnel for client
j. Preparing an analysis of paper flow to determine who handles what and why
k. Presenting and analyzing the pros and cons of various retirement and profit
sharing plans, including their tax consequences
l. Advising on various wage incentive plans
3. Highly Specialized Services. These require special skills, aptitude and training which
CPAs do not normally possess:
a. Reviewing the organization structure to determine if the duties and responsibilities
are assigned logically and efficiently:
Interview employees
Efectiveness of communication
Work flow analysis
Work standard and Job classification
b. Auditing management policies for their efectiveness
c. Conducting motion studies for standard cost systems
d. Surveying an industry or trade for current trends
e. Evaluating the desirability of a particular area for plant location
f. Preparing market analysis of products and services
Setting up quotas
Per capita consumption
Territorial diferences
g. Reviewing an insurance program
h. Advising on a data processing installation:
Forms and procedures
Adapting conventional accounting data to computer language
PRE-ENGAGEMENT CONSIDERATIONS
1. Negotiating the engagement
ENGAGEMENT PLANNING
2. Preparing for and starting the engagement
ENGAGEMENT MANAGEMENT AND EXECUTION
3. Conducting the engagement
4. Preparing and presenting the reports and recommendations
5. Implementing the recommendations
ENGAGEMENT CONCLUSIONS
6. Evaluating the engagement
7. Post engagement follow-up
Interim Reporting – enables the practitioner to promptly recognize and resolve unforeseen
problems or restrictions which could hinder or prevent successful conclusion of the engagement.
Should significant changes occur as to the scope and procedures to be taken, the practitioner
should first review them with the client and have the work program subsequently reflect them.
The practitioner should not proceed with the execution unless the client approves such changes.
IV. PREPARING AND PRESENTING THE REPORT
The final report may be written, oral or both. The best approach is either to issue a written
report and supplement it with oral presentation or make an oral presentation and
supplement it with a written report.
The final written report summarizes the work performed by the practitioner and relates
the same to the scope of engagement as agreed upon during the negotiation stage. It likewise
summarizes the practitioner’s findings and recommendations in a clear and logical manner,
together with any assumptions made. The written report may serve as a continuing reference
document for client-management in their post-engagement evaluation, training, implementation
and interpretation.
Types of written reports
1.) Long form report – contains all the circumstances about the engagement, including the
practitioner’s findings and recommendations. Usually, this type of report is issued to the
client when he decides to do the implementation phase without requesting assistance
from the consultant.
2.) Short term report – is usually presented in a letter-format and is restricted to the
consultant’s key findings and recommendations. Usually issued when during the execution
stage of the engagement, interim reporting was extensively used, and there was a close
and continuous coordination between the consultant/ team members and the client.
V. IMPLEMENTATION OR INSTALLATION OF RECOMMENDATIONS
Major Phases in Implementation
1. General Design -- serves as a basic guide in implementation. It shows what
kind of system or program it is to be installed or implemented, and indicates,
in general terms, the diferent activities to be undertaken.
2. Detail Design – indicates in detail how the diferent activities are to be
undertaken, including specific and step-by-step instruction on each stage or
operation.
3. Testing – involves trying out the various elements of a system or program to
check if they will function properly.
4. Conversion -- involves the retirement of the old system and introduction of
the new one.
5. Monitored Performance and Follow-up – after formally installing the new
system or program, the same should closely observed for a reasonable period
of time to check if it is functioning as expected, if the employees have indeed
adopted the new system, if the anticipated benefits are actually being
realized, and if necessary modifications and refinements are considered and
introduced.
VI. EVALUATING THE ENGAGEMENT
It is done to assess the quality of the work and make any improvements or
refinements in work quality for future engagements. The engagement should be
evaluated in terms of client’s level of satisfaction and achieving the engagement
objectives. Areas normally evaluated are the engagement proposal, engagement
program and schedule, source data and documentation, and engagement results.
Benefits derived from evaluation:
1. It sets the direction for staf training program
2. It enables the practitioner to timely evaluate the on-the-job performance of his
staf.
3. It provides data for determining required resources for future engagements.
4. It serves as a tangible evidence of quality consciousness consistent with the
other areas of a CPA practice.