Exercise 1 – Introduction to Management Consultancy

Assistant Professor Ron Reyes

Multiple Choice. Select the best answer.

1. A management consultant
a. is 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 a firm.
b. Is a person who is qualified by education, experience, technical ability, and temperament to
replace businessmen on a professional basis in identifying, defining, and solving specific
management problems involving the organization, planning, direction, control, and operation
of a firm
c. Is an employee of a client firm 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 problems involving the organization, planning, direction, control, and
operation of a firm.
d. Should be a CPA, holder of a masters degree so he may be considered qualified by education,
experience, technical ability, and temperament to advise businessmen on how management
problems could be solved.
2. Generally, the emergence and growth of management consultancy may be attributed
to the following factors, except
a. Growth in size and complexity of business firms.
b. Complexity in managing and conducting a business
c. Lack of incompetent staff
d. Need for adequate and timely information in management decision-making
3. Some reasons for hiring management consultants are as follows, except
a. To help define specific problems and implement solution
b. To provide specialized skills and experience.
c. To provide confidential service in which the identity of the client is concealed.
d. To render an independent opinion.

4. The primary purpose of management advisory service is

a. To achieve the objectives of the MAS firm.
b. To help the client maximized its resources
c. To improve the client’s use of its capabilities and resources to achieve the objectives of such
client’s organization.
d. To help the client identify its problems.

5. MAS can relate to the following areas, except

a. The management functions of analysis, planning, organizing and controlling
b. The introduction of new ideas, concepts, and method to management.
c. The improvement of policies, procedures, systems, methods, and personal relationships.
d. The application and use of managerial accounting, control system, data processing, and
mathematical techniques and methods.
6. In providing advisory services, the CPA, or the independent accounting firm, applies an analytical
approach and process, which typically involves the following, except
a. Ascertaining the pertinent facts and circumstances
b. Seeking and identifying objectives.
c. Defining the problem and opportunity for improvement.
d. Evaluating and implementing possible solutions.
7. Following are possible end-products of an MAS engagement, except
a. An organization plan with statement of duties and responsibilities.
b. Blue print of construction project.
c. An electronic data processing system.
d. Sales reporting system.
 Exercise 1 – Introduction to Management Consultancy
Assistant Professor Ron Reyes

8. Which of the following statement(s) is (are) true?

1. MAS relates to the future.
2. MAS cover’s a wider area than the usual audit and tax work.
3. Because of the broad scope covered by MAS, a wider variety of assignments are usually
encountered.
4. MAS’ engagements require highly qualified staff.
a. All the statements are true.
b. Only three statements are true
c. Only two statements are true
d. Only one statement is true.
9. MAS areas which normally is related to accounting and finance functions may include
a. Establishment of budgetary controls.
b. Preparation of organization and administrative manuals.
c. Plant layout studies.
d. Development of preventive maintenance systems.

10. Among the MAS areas which are not related to the accounting and finance functions is marketing,
which may include the following, except
a. Product profitability analysis.
b. Determination of pricing policy
c. Inventory management studies.
d. Evaluation of salesmen’s incentive compensations.

11. The fields of cost accounting and financial management are among the MAS areas that are
normally related to the accounting and finance functions. Financial management cases may
involve the following, except
a. Establishment of capital budgeting procedures.
b. Study of the cost of capital and cost of debt.
c. Variance analysis
d. Establishment of operating and cash budgets.

12. MAS may be classified according to the practitioners’ ability and/or expertise. Those services which
are considered extensions of the usual accounting work and require additional training and/or
experience
a. Usual services.
b. Somewhat specialized services.
c. Highly specialized services.
d. Unusual services.

13. Management advisory services classified as usual services include

a. Giving advice on dividend policy and plans for expansion.
b. Analysis of financial and operating statements for management, stockholders, banks, and
others.
c. Advising on accounting and tax matters relative to estate planning in cooperation with legal
and insurance counsel.
d. Calculations on government contracts and allocating costs in compliance with reporting
requirement.

14. MAS classified as somewhat specialized services include

a. Design and installation of accounting systems.
b. Suggestions for improvements in internal control system.
c. Assistance in the preparation of forecasts and budgets.
d. Assisting in bankruptcy and receivership proceedings.

15. MAS classified as usual services include the following, except

 Exercise 1 – Introduction to Management Consultancy
Assistant Professor Ron Reyes

a. Evaluation of form of business organization

b. Design of filing system for storing the accounting records
c. Establishment of control for cash, receivables, inventory, plant, property and equipment, and
other items to assist management and expedite the audit process.
d. Preparing market analysis of products and services.

16. In determining the scope or type of service to be rendered, the consultant

a. Has the responsibility to determine the scope of services he is competent to offer, subject to
the pronouncements of his profession.
b. Is expected to maintain his independence to enable him to render his professional judgment
and express his opinions/conclusions with honesty and objectivity.
c. Both a and b
d. Neither a nor b

17. Which of the following statements is incorrect?

a. A CPA engaged in the practice of MAS is bound by the Code of Ethics for Professional
Accountants.
b. Management consulting and other advisory services are among the assurance engagements
performed by professional accountants.
c. Not all MAS practitioners are bound by the Code of Ethics for Professional Accountants.
d. It is the responsibility of a practitioner to be sure that the nature and scope of the management
advisory services he elects to offer are in conformity with the Code of Ethics for Professional
Accountants.

18. In cases where clients seek to engage the services of a consultant to provide solutions and results
on a basis wherein the client expects to be involved only to a limited extent,
a. There may be a tendency to apply a packaged solution indiscriminately, which inhibits
b. The client might get solutions that do not meet actual needs, and the consultant might be place
in a position inconsistent with his objective advisory role.
c. The consultant must fully inform the client of the limitations and risks inherent in these types of
undertaking.
d. All of the above

19. Following are the steps involved in the analytical approach and process presented random:
1. evaluating and determining possible solutions
2. seeking and identifying objectives
3. presenting findings and recommendations
4. ascertaining the pertinent facts and circumstances
5. defining the problem or opportunity for improvement
6. planning and scheduling actions to achieve the desired results
7. advising and providing technical assistance in implementing
Arrange the above steps in proper order:
a. 1, 2, 3, 4, 5, 7, 6
b. 4, 2, 5, 1, 3, 6, 7
c. 5, 1, 4, 6, 2, 7, 3
d. 7, 5, 3, 1, 6, 2, 4

20. The analytical approach & process may be summarized into 3 broad stages–analysis, design & implementation.
a. Planning and scheduling actions to achieve the desired results, as well as advising and
providing technical assistance in implementation.
b. Ascertaining the pertinent facts and circumstances, seeking and identifying objectives, and
defining the problem or opportunity for improvement.
c. Evaluating and determining possible solutions and presenting findings and recommendations.
d. All of the above
******The End*******