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Management Services (Consultancy) – refers to the professional service performed by specially trained and
experienced persons in giving assistance to management in improving managerial,
operating, and economic performance of the various institutions of our society.

 Management consultancy is not an exclusive field of practice for CPAs and is not regulated by law

Analytical approach and process in providing professional services (advise)

1. Ascertaining the pertinent facts and circumstances
2. Seeking and identifying objectives
3. Defining the problem or opportunity for improvement
4. Evaluating and determining possible solutions
5. Presenting findings and recommendations
Should the company continue the engagement, the latter may also be involved
6. Planning and scheduling actions to achieve the desired results
7. Advising and providing technical assistance in implementing his recommendations
Scope of Services
Full Scope Engagement – Performing 1 – 7 in the analytical approach (provide technical assistance in the
Special Study Engagement – Performing 1 – 5 only in the analytical approach
Informal Advice – Respond as practicable at the moment and state the basis for his response (does not
assume responsibility because no extensive study has been performed)
Characteristics of Management Services Engagement
1. Service is for 5. Broad in Scope
Management 6. Varied Assignments
2. Related to the Future 7. Greater Job Specifications
3. Problem-solving 8. Requires Good Human
4. Non-recurring Relations

Practice Standards
1. Personal 5. Understanding with Client
Characteristics 6. Planning, Supervision, and
2. Competence Control
3. Due Care 7. Sufficient Relevant Data
4. Client Benefit 8. Communication of Results

Stages in MS Engagement
1. Negotiating the engagement 5. Implementing the
2. Preparing for and starting the engagement recommendations
3. Conducting the engagement 6. Evaluating the engagement
4. Preparing and presenting the report and 7. Post-engagement follow-up


1. The primary purpose of management is to
a. To achieve the objectives of the MS firm
b. To help the client maximize 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
2. Management consulting
a. Is limited to CPAs
b. Is not limited to CPAs
c. May be practiced by anybody since it is not limited to CPAs
d. Is regulated by law, such that an individual must pass a government licensure examination first
before he could practice the same
3. CPAs are in more advantageous position than members of other professions to render MAS because
a. Most CPAs are highly educated
b. Only CPAs may render MAS
c. A CPA is a person with recognized standing
d. The CPA is already familiar with the client and his business, and enjoys his client’s confidence

4. Following are possible end-products of an MS engagement, except

a. An organization plan with statements of duties and responsibilities
b. Blue print of a construction project
c. An electronic data processing system
d. Sales reporting system

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

1. MAS relates to the future
2. MAS covers 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
4. MAS engagement require highly qualified staff
a. All the statements are true c. Only two statements are true
b. Only three statements are true d. Only one statement is true

6. Which of the following statements is not acceptable?

a. A CPA represents three major players in the industry in rationalizing the industry’s incentive
before the government public hearing.
b. A CPA shares with a new and substantial client information regarding another client belonging to
the same industry.
c. A CPA provides consulting services to an existing audit client.
d. A CPA offers and provides consulting services to two major competing client.

7. Which of the following is not a characteristic of Management Advisory Services?

a. MAS is broad in scope
b. MAS involves problem-solving affecting the future operations of the client
c. Beneficiary of service is management
d. MAS is repetitive as far as the same client is concerned

8. The analytical approach and process may be summarized into three broad stages – analysis, design and
The implementation stage consists of
a. Planning and scheduling actions to achieve the desired results, as well as advising and providing
technical assistance in implementing
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

9. Which of the following statements is incorrect?

a. Full scope engagements require client representations from both the working and decision-making
b. The consultant’s role in full scope engagement should be limited to that of an objective adviser;
and, in the implementation stage, his job is merely to provide technical assistance, degrees of
which depend on the knowledge and experience available in the client’s organization
c. In carrying out full scope engagements, the consultant should participate up to the
implementation stage and should see to it that the client management accepts overall
responsibility for implementation of the chosen course of action.
d. Once implementation is concluded, the consultant’s participation is also concluded and only the
consultant’s personnel remain to carry on the solution.

10. In special study engagements

a. The consultant’s contribution is to give advice on the overall program and the organization and
composition of the participating groups, to provide technical assistance to the working level, to
monitor progress and to report on this and other important matters to the senior management
b. The client does not seek the consultant’s assistance in achieving the desired result, but only his
professional judgment
c. Client representations from both the working and decision making levels are required


d. Any action beyond the point of decision is solely the responsibility of the consultant.
11. In informal advice,
a. The nature of the service rendered is informal and therefore, no presumption should exist that an
extensive study has been performed to identify and consider pertinent facts and alternatives
b. Any action beyond the point of decision is solely the responsibility of the consultant
c. Once the implementation is concluded, the client’s participation is concluded, and only the
consultant’s personnel remain to carry on the solution
d. The consultant need not be independent in mental attitude

12. In the course of providing a particular type of service, the CPA is called upon by the client to give
informal advice on diverse questions, not necessarily related to the service being rendered. The CPA’s
opinion is sought in view of his knowledge of the particular client’s affairs and his broad exposure to
other situations. Which of the following statements best expresses the CPA’s role under these
a. The CPA should inform the client that it would be improper for him to give any advice until an
extensive study has been performed to identify and consider the pertinent facts and alternatives.
b. The CPA should tactfully remind the client that the advice sought is not covered by the terms of
the original agreement. He should then discuss the matter with the client and determine with him
whether a further study is desired as a separate project.
c. The CPA should withhold any advice until he has identified and considered the pertinent facts
and alternatives and can assume responsibility to assure that any ensuing action will be effective.
d. The CPA should respond as practicable at the moment and express the basis for the response so
that such informal advice is offered and accepted for what it is. In providing informal advice, there
is no presumption that an extensive study has been performed to identify and consider pertinent
facts and alternatives, and no responsibility is assumed by the CPA for seeking to achieve client
action or for seeking to assure that any ensuing action will be effective

13. During the course of an audit, the client’s controller asks your advice on how to revise the purchase
journal so as to reduce the amount of time his staff takes in posting. How should you respond?
a. Explain that under the Code of Professional Ethics you cannot give advice on management
advisory services areas at the same time you are doing you are doing an audit.
b. Explain that under the Statement of Management Advisory Services informal advise of this type is
c. Respond with definite recommendations based upon your audit of these records but state that
you do not assume any responsibility for any changes unless your specific recommendations are
d. Respond as practicable at the moment and express the basis for your response so it will be
accepted for what it is

14. It refers to the practitioner’s ability to identify and define client needs, select and supervise appropriate
staff, apply an analytical approach and process appropriate to the engagement, apply knowledge of the
technical subject matter under consideration, communicate recommendations effectively, and when
required, assist in implementing recommendations.
a. Due professional care c. Professional competence
b. Planning and supervision d. Client benefit

15. Competence in management advisory services is acquired by

a. Education c. Actual performance of MS services
b. Auditing and other experience d. All of the above
16. These statements relate to MAS practice standards
1. A practitioner is to notify the client of any reservation he has regarding anticipated benefits.
2. Throughout the engagement, there ought to be a systematic critical review of accomplishments
and work should be done within the framework of the code of ethics and other professional
3. During the engagement, should there be a significant change between cost and anticipated
benefits, the client should be informed.
4. Before the engagement, the practitioner must make arrangements with, and inform the client on
significant matters related to engagement, in writing.
Of these statements, which pertain to the practice standard on client benefit?
a. Statements 1 and 3 only. c. Statement 1 only.
b. All statements. d. Statement 1, 3 and 4 only.

17. This stage of MAS engagement involves various activities which generally be classified as gathering of
information and analysis/evaluation of information gathered
a. Negotiating the engagement c. Conducting the engagement
b. Preparing for the engagement d. Preparing and presenting the reports and
18. Which of the following statements is correct?
a. A certified public accountant can readily render management advisory services to the public.
b. A CPA with MBA and DBM degrees is automatically qualified to render management advisory
c. Competence as a standard in the rendition of management advisory services by a CPA may be
equated to having excellent scholarly preparation to include the usual baccalaureate degree, an
MBA and other post graduate studies.
d. Adequate training and experience in both the analytical approach and process in a particular
undertaking are requisites for the CPA to be involved in a management advisory service

19. Which of the following statements is incorrect?

a. CPAs provide management advisory services to go around the ethical constraints as mandated
by the Accountancy Law.
b. Businesses hire management consultants to help define specific problems and develop
c. CPAs who are performing management advisory services may be considered to be in the practice
of management consulting.
d. Included in the practice of consulting is the provision of confidential service in which the
identity of the client is concealed.

20. A CPA should reject management advisory services engagement if

a. It would requires him to make management decisions for an audit client
b. The proposed engagement is not accounting related
c. His recommendations are to be subjected to a review by the client
d. He audits the financial statements of a subsidiary of the prospective client

21. Management services of Certified Public Accountants cover all of the following, except
a. Project feasibility studies
b. System design development and implementation
c. Organizational development and planning
d. Audit, tax and legal services

22. The following statements refer to competence of CPAs in management advisory services, except
a. In concept, it refers to the technical qualification of the practitioner and his ability to supervise
and evaluate the quality of work of his staff assigned to the engagement to be responsible for the
successful completion of the project.
b. It is acquired by education, self-study, attendance to professional development courses, actual
experience in MS work and research.
c. It is the ability to identify client’s needs, use analytical approach and process, apply technical
knowledge, communicate recommendations and assist in implementation.
d. It must be retained in the rendition of MAS work and it can be impaired if the CPA performs
decision-making for the client or acts as employee of the client.

23. Which of the following will not impair the independence of a CPA in the rendition of Management
a. The CPA performs decision-making services for his client.
b. The CPA performs services wherein he is in effect, acting as an employee of the client.
c. The CPA loses his objectivity and acts in a manner as if he is advocating for the interest of his
d. The CPA does not extend his services beyond the presentation of recommendations or giving of

24. Mr. Rey Carlos, a CPA firms’ partner-in-charge of quality assurance and review is arguing with Mr.
Fortuna, the consulting partner regarding the question on independence as Mr. Fortuna is presently
rendering consulting service to T. Ang and Nga Co., an audit client of the firm. Related to his issue of
independence, all of the following statements are not valid except
a. Independence is never sacrificed for as long as the auditor/consultant is correct in his for the
b. A CPA who renders both audit and consulting services to a client by virtue of his
competence/expertise and extensive knowledge of the client’s business is in the best position to
render decisions for the client.
c. The client is the ultimate decision maker and the auditor/and or consultant should not make
decisions for the client


d. It is up to professional judgment and discretion of the auditor/consultant to render decisions for
the client for as long as his professional fees are commensurate to the benefit that the client will
derive from the engagement.

25. Indicate the statements as either true or false.

Statement 1.CPAs in MAS practice must observe the general provision of the Code of Professional
Ethics for CPAs as well as the provision thereof of CPAs in Public Accounting, except
those provisions of expression of opinion on financial statements.
Statement 2. Management consultancy is a n exclusive field of practice for CPAs and is regulated by
Statement 3. Although management services (MS) extend beyond the traditional accounting services,
MS practitioners are still bound by the rules of professional ethics in the practice of
accounting in general.
Statement 1 Statement 2 Statement 3
a. True False False
b. False True True
c. False True False
d. True False True

26. An audit independence issue might be raised by the auditor’s participation in management advisory
services engagements. Which of the following statements is most consistent with the profession’s
attitude towards this issue?
a. Information obtained as a result of management advisory services engagement is confidential to
that specific engagement and should not influence the performance of the attest function
b. The decision as to the absence of independence must be made by the client based upon the facts
of the particular case
c. The auditor should not make management decisions for an audit client
d. The auditor who is asked to review management decision is also competent to make these
decisions and can do so with independence

27. While doing systems analysis in an engagement, you made use of various charts and diagrams during
the data gathering and documentation stage. One of the first charts you requested your client to furnish
you was that which showed the functional divisions indicating responsibility, authority and
accountability of each one. This referred to as
a. Work distribution chart c. Layout chart
b. Statistical chart d. Organization chart

28. Among the following major parts of a project feasibility study, which grouping is considered critical?
a. Management, financial and social returns
b. Technical, financial and environmental aspects
c. Economical benefits, management, and financial
d. Marketing, engineering or technical and financial

29. The preparation of a project feasibility study covers various processes. All of the following are those
processes except
a. In-depth technical studies and validation
b. Commissioning up to commercial startup of the business
c. Sensitivity analyses considering various likely scenarios
d. Collection of data

30. The part of the project feasibility study that covers the relationship between the benefit to be obtained
from an undertaking and the cost of such undertaking is known as:
a. The profitability c. The social desirability
b. The economic aspect d. The financial projections



Management Accounting – the application of appropriate techniques and concepts to economic data so as to
assist management in establishing plans for reasonable economic objectives and in
the making of rational decisions with a view toward achieving these objectives.

Objective – To provide management information needed in:

a. Planning, evaluating and controlling operations, decision making.
b. Safeguarding the organization’s assets
c. Communicating with interested parties outside the organization, such as shareholders and regulatory
Scope – Management accountants do the following tasks:
a. Data accumulating c. Problem - Solving
b. Interpreting and reporting of information

Management Accounting vs. Financial Accounting

Management Accounting – concerned with providing financial information to persons within the
organization to enable them to make informed judgments and effective decisions.
Financial Accounting – the systematic recording of business transactions governed by GAAP leading to
the preparation of financial statements for the use of various interested parties,
internal as well as external.

Areas of Concern Financial Accounting Management Accounting

a. Objective Provide data to internal Internal users
and external users
b. Compliance with Need to conform with Need not conform
c. Emphasis on the Past oriented Future oriented
d. Relevance and All-purpose reports are Information must be
flexibility of data prepared relevant for a particular
e. Emphasis on Emphasis on precisions Emphasis on timeliness
precision and
timeliness of report
f. Reporting Company as a whole Segments of the Company
g. Compliance with law Required by law Not mandatory

Cost Accounting – the systematic set of procedures for recording and reporting measurements of the cost
of manufacturing goods and performing services in the aggregate and in detail.

Activities for Management Accountant:

1. Planning – quantifying and interpreting the effects on the organization of planned transactions and
other economic events.
2. Reporting – both internal and external needs for information about past or future events.
3. Controlling – interpret information pertinent to the organization and communicate the implications
of the information being reviewed.
4. Resource management – implementing a system of reporting that is aligned with organizational
5. Information systems development – the information system must meet the needs of all people who
require information to perform their jobs.
6. Technological implementation – be familiar with current technology relative to information
processing and accounting techniques appropriate to controlling and using the information.
7. Verification – assure the accuracy and reliability of information derived from the accounting
8. Administration – development and maintenance of an effective and efficient management
accounting organization.


Two important people in Management: Comptroller and Treasurer

Functions of a Controller and Treasurer

Controller’s Function = Treasurer’s Function = PSBI-

1. Planning and control 1. Provision of capital
2. Protection of assets 2. Short-term financing
3. Internal reporting 3. Banking and custody
4. External reporting 4. Investor’s relation
5. Evaluation and consulting 5. Foreign exchange
6. Economic appraisal 6. Credits and collections

Multiple Choice Questions

1. Managerial accounting reports can be described as:

a. General-purpose c. Classified financial statements
b. Special purpose d. Macro-report

2. The first step in managerial decision making is to

a. Specify the standard or expected outcome.
b. Gather information about the consequence of each alternative.
c. Identify a problem.
d. List alternative courses of action.

3. Which of the following is true of managerial accounting rather than financial accounting?
a. The outputs of this accounting system are the primary financial statements
b. An overseeing board establishes the methods of this accounting system.
c. The accounting methods are standardized to allow comparisons among companies
d.The accounting system would be unique to each company

4. That kind of accounting concerned with providing information to management in making decisions
about the operations of the business

a. Responsibility accounting c. Management accounting

b. Cost accounting d. Correct answer not given

5. Management accounting

a. Is governed by generally accepted accounting principles.

b. Draws from disciplines other than accounting.
c. Is geared primarily to the past rather than the future.
d. Places more emphasis on precision of data compared with financial accounting which does snot.

6. Which of the following characteristics does not relate to management accounting?

a. Accounting reports may include non-monetary information
b. It is subject to restrictions imposed by GAAP.
c. Reports are often based on estimates and are seldom useful for anything other than the purpose
for which they are prepared.
d. It provides data for internal users within the business organization.

7. Management accounting is an integral part of the management process. As such, it provides essential
information for the following objectives except
a. Maintaining the current level of resource utilization as well as internal and external
b. Measuring and evaluating performance.
c. Planning strategies and controlling current activities of the organization.
d. Enhancing objectivity in decision-making.

8. Which type of authority do management accountants generally exercise?

a. Functional b. Company c. Line d. Staff


9. Which of the following is not a characteristic of a “Staff” authority?
a. It gives support, advice, and service to line managers.
b. It is exercised laterally or upward.
c. It has the authority to command action or give orders to subordinates.
d. None of the above
10. In financial accounting, certain rules and regulations must be followed on how financial statements must
be presented to the reader. In managerial accounting, no such restrictions generally apply because it is:
a. An entirely different field that need not observe the broad guidelines in financial accounting.
b. Designed to provide management with non-financial information for decision-making.
c. Designed to provide accounting and other financial data to assist management in making business
d. A discipline that does not require preparation of other financial statements.
e. All of the above.

11. Which of the following characteristics relate to Financial Accounting?

a. Reports are promptly prepared and submitted to preserve its usefulness.
b. Data may be both historical and estimates.
c. It must adhere to the generally accepted accounting principles.
d. It provides information needed by management in making decisions.

12. The following characteristics refer to Financial Accounting except

a. Provides information to external users
b. Emphasizes on objective data
c. Has no externally imposed standards
d. Generates general purpose financial statements

13. To distinguish between management accounting and financial accounting, the following statements are
correct, except
a. Management accounting, in view of its various integrated recipients should have a separate data
recording and retrieval system from financial accounting.
b. Financial accounting is bound by GAAP, and management accounting need not be in conformity
with GAAP.
c. Financial accounting can be regarded as the process while management accounting can be
regarded as the product of the process.
d. Management accounting output must be released on time so as not to erode its usefulness;
Financial accounting output can still be useful even when delayed.

14. You were newly appointed as controller of CZX Corporation. Among the jobs your department would do
include the following:
a. Cash receipts, cash disbursements, general accounting, taxation, financial accounting analysis,
and internal auditing.
b. Financial reporting, strategic planning, managerial accounting, taxation, financial statement
analysis, and internal accounting.
c. Financial accounting, managerial accounting, cost accounting, inventory accounting, payroll
accounting, tax accounting and sales forecasting.
d. Tax accounting, managerial accounting, internal auditing, general accounting.

15. Controllership has attained special recognition in corporate management as business expands in
complexity and reach, and as the controller exerts influence for management to take organization’s goals.
Controllership and treasurer ship constitute corporate finance. These are among the controller’s
traditional functions:

1. Tax management.
2. Financial reporting and interpretation.
3. Credit management.
4. Sourcing and investing of funds.
5. Reporting to government regulatory agencies.
6. Risk management.
7. Economic appraisal.
8. Planning for control.

a. All eight items. c. Items 1, 2, 3, 4, 5, 7, and 8 only.

b. Items 1, 2, 5, 7, and 8 only. d. 2, 3, 5, and 7, and 8 only.

16. The chief management accountant called “controller” traditionally performs these functions except:
a. The establishment and implementation of the financial planning process.
b. Financial and management reporting and interpretation.
c. Protection of company resources and economic evaluation.
d. Preparation of proposals for product promotions.

17. As business increase in complexity, the function of controllership has attained top level recognition in the
corporate area. Many areas related to finance and accounting have been identified with controllership.
One area that becomes controversial when included under the controller and viewed that such inclusion
violates basic internal control is
a. Credit and collection.
b. Internal auditing.
c. Long-range financial planning.
d. Taxation and reporting to government agencies.
18. Which of the following is not usually a controller’s function?

a. Planning for control. c. Tax administration.

b. Protection of assets. d. Credit and collection.

19. Which of the following is not a Controller’s function?

a. In charge of planning and control
b. Protection of assets such as adequate insurance coverage. Etc.
c. Interpreting and reporting on effects of external factors on the business
d. Arranging short-term financing

20. Controllers are generally not concerned with

a. Reporting to government c. Protection of assets

b. Preparation of tax returns d. Investor relations

21. Which of the following is a Controller’s responsibility?

a. Tax planning and accounting c. In charge of credit and collection

b. Custodian of funds d. Arranging short-term financing

22. The treasury function includes

a. Preparation of tax returns c. Reporting to government
b. Cash custody and banking d. Financial reporting

23. The treasurer function is usually not concerned with

a. Investor relations.
b. Financial reports.
c. Short-term financing.
d.Credit extension and collection of bad debts.

24. Which management position is responsible for raising capital?

a. Internal auditor c. Controller
b. Treasurer d. CFO

25. The responsibility for safeguarding financial assets and arranging financing is given to the

a. Controller c. Comptroller
b. Chief financial officer d. Treasurer

26. Which of the following is a Controller’s responsibility?

a Tax planning and accounting c In charge of credit and collection

. .
b Custodian of funds d Arranging short-term financing
. .