CPA REVIEW SCHOOL OF THE PHILIPPINES

MANAGEMENT ADVISORY SERVICES

OVERVIEW OF THE MS Practice by the CPA

1. 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 no given

1-C

2. 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.

2-B

3. A type of managerial accounting which refers to the determination of the

operating cost regardless of cost behavior is
a. Differential accounting c. Responsibility accounting
b. Full cost accounting d. Profitability accounting

3-B

4. 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.

4-B

5. 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 communication.
b. Measuring and evaluating performance.
c. Planning strategies and controlling current activities of the organization.
d. Enhancing objectivity in decision-making.

5-A

6. Statement 1 Managerial control and engineering control are synonymous.

Statement 2 Control from the viewpoint of management accounting is defined as
the process of setting maximum limits on financial expenditures.
a. b. c. d.
Statement 1 True False True False
Statement 2 True False False True

6-B

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

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

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7-D

8. Which of the following is not a characteristic of a “Staff” authority?

a. It gives support, advise, 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

8-C

9. 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 decisions.
d. A discipline that does not require preparation of other financial statements.
e. All of the above.

9-C

10. 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.

10-C

11. 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

11-C

12. 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.

12-A

13. 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

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13-A

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.

14-D

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 treasurership
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.

15-B

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.

16-D

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.

17-B

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.

18-D

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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

19-D

20. Controllers are generally not concerned with

a. Reporting to government c. Protection of assets
b. Preparation of tax returns d. Investor relations

20-D

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

21-A

22. Which of the following is not a controllership function, as distinguished

from a treasury function?
a. Reporting and interpreting c. Protection of assets
b. Credit and collection d. Government reporting

22-B

23. The primary purpose of management advisory services is

a. To conduct special studies, preparation of recommendation, development plans and
programs, and provision of advise and assistance in their implementation.
b. To provide service or to fulfill some social need.
c. To improve the client’s use of its capabilities & resources to achieve the
objectives of the organization.
d. To earn the best rate of return on resources entrusted to its care with safety
of investment being taken into account and consistent with the firm’s social and
legal responsibilities.

23-C

24. Which of the following statements is not true?

a. In the rendition of MAS, independence must be observed so as to maintain the
essential requisites of impartiality and objectivity.
b. All provisions of the code of professional ethics are applicable to the practice
of MAS except those rules related to the expression of an opinion on financial
statements.
c. MAS serves only in the areas of accounting and finance.
d. Before accepting an engagement, a practitioner should notify the client of any
reservations he has regarding anticipated benefits.

24-C

25. Which of the following acts is not performed by an independent CPA engaged to
install an accounting system?
a. Formulation of the chart of accounts
b. Design of business and accounting forms
c. Supervision of application of system and procedures recommended
d. Preparation of an accounting manual.

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25-C

26. The following characterize management advisory services except

a. Involve decision for the future.
b. Broader in scope and varied in nature.
c. Utilize more junior staff than senior members of the firm.
d. Relate to specific problems where expert help is required.

26-C

27. Which of the following is not a characteristic of management services?

a. A wider variety of assignments are encountered in MAS than in audit.
b. MAS engagements are recurring.
c. MAS pinpoint actions to be taken, the benefits of which will be received in the
future.
d. In MAS engagements, the nature of work involved requires a lesser need for
junior assistance.

27-B

28. 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

28-D

29. Which of the following types of management services is normally related to

accounting and finance?
a. Management audit.
b. Marketing forecasts.
c. Costs determination of alternatives in collective bargaining agreements.
d. Job evaluation and salary administration.

29-C

30. Which of the following types of management services is not directly related
to accounting and finance functions?
a. Cost analysis of major investment decision.
b. Long range planning.
c. Design, installation and review of budgetary system.
d. Valuation of capital stock of companies for purposes of merger or sales.

30-B

31. A certified public accountant’s scope of management services is broad and

covers all of the following except
a. Change management engagements. c. Audit engagements.
b. Computerization engagements. d. Re-engineering jobs.

31-C

32. Which of the following is not classifiable as a management advisory service

by CPAs?
a. Systems design. c. Make or buy analysis.

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b. Project feasibility study. d. Assistance in budgeting. (?)

32-D

33. Which of the following is not classifiable as a management advisory service

by CPAs?
a. Annual financial planning and budgeting. c. Information systems.
b. Public relations work. d. Lease-or-buy analysis.

33-B

34. Management services of certified public accountant cover all of the following
except
a. Project feasibility studies. c. Organizational development and planning.
b. Systems design, development and implementation. d. Audit, tax and legal
services.

34-D

35. Which of the following does not relate to management services by CPAs?
a. Design and/or installation of accounting systems. c. Cost analysis of major
investment decisions.
b. Financial analysis for project feasibility studies. d. None of the
above.

35-D

36. Which of the following is not an area related to the performance of

management services by independent accounting firms?
a. Introducing new ideas, concepts and methods to management.
b. Improving existing policies, methods and procedures
c. Performing special studies, preparing recommendations, and formulating plans and
programs
d. Performing management functions and making decisions

36-D

37. A management advisory services engagement involves the following activities

in what order?
I. Post-engagement follow-up.
II. Implementing the recommendation.
III. Conducting the engagement.
IV. Negotiating the engagement.
V. Preparing for and starting the engagement.
VI. Evaluating the engagement.
VII. Preparing and presenting report and recommendations.
a. VII, VI, V, IV, III, II and I. c. IV, III, V, VI, II, VII, and I.
b. III, IV, V, VI, VII, I and II. d. IV, V, III, VII, II, VI, and I.

37-D

38. The following statements refer to competence of CPA’s 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 so as 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.

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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.

38-D

39. Which of the following statements is True?

a. Adequate training and experience in both the analytical approach and process in
the particular undertaking are requisites for the CPA to be involved in a
management service engagement.
b. A CPA with MBA and PhD degrees is automatically qualified to render management
services.
c. Competence as a standard in the rendition of management 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. A certified public accountant by virtue of having the necessary academic
preparation and by hurdling the licensure examinations required to have a CPA
license can readily render management services to the public.

39-A

40. 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 standards.
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.

40-A

41. Which of the following is not a qualification of a CPA in MAS practice?

a. Familiarity with the client’s financial accounting and internal control systems
b. Analytical experience in problem solving
c. Professional independence, objectivity and integrity
d. Auditor of the client

41-D

42. As a consultant, the CPA practitioner should

a. Exercise administrative control over the client’s staff to avoid unnecessary
delays in implementation.
b. Encourage dependence of client on the consultant’s staff so as to pinpoint clear
responsibility in implementing systems.
c. Not take responsibility for making decisions and policy judgments in MAS
engagements.
d. Conduct his engagement as if he is a member of the client’s organization.

42-C

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43. The Revised Accountancy Law incorporates the Code of Professional Ethics for
CPAs. The provision of management advisory services is among the areas of public
accounting. It is, however, not exclusive to CPAs. Considering these premises,
which of the following statements is applicable?
a. Management advisory services as a field of practice is considered as an integral
part of public accounting thus, the Code of Professional Ethics for CPAs covers
management advisory services.
b. CPAs in the practice of audit and management consulting services may advertise
and charge contingent fees.
c. The practice of management advisory services should not be extended to existing
audit clients since this will adversely affect the CPA’s independence.
d. CPAs in the practice of management advisory services are not bound by the Board
of Accountancy but are bound by the said law in the practice of audit.

43-A

44. Which of the following statements is False?

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

44-A

45. 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.

45-B

46. Mr. Rey Carlos, a CPA firm’s partner-in-charge of quality assurance and
review is arguing with Mr. Reuben Fortuna, the consulting partner regarding the
question of independence as Mr. Fortuna is presently rendering consulting services
to T. Ang and Nga Co., an audit client of the firm. Related to this 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 decisions for the client.
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 and should do so.
c. The client is the ultimate decision maker and the auditor and/or consultant
should not make decisions for the client.
d. It is us 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.

46-C

47. Which of the following acts is not performed by an independent CPA engaged to
design the accounting system?

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a. Formulation of the chart of accounts.
b. Design of business and accounting forms.
c. Supervision of implementation of system and procedures recommended
d. Preparation of an accounting manual.

47-C

48. Which of the following will not impair the independence of a CPA in the
rendition of Management Services?
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 client.
d. The CPA does not extend his services beyond the presentation of recommendations
or giving of advice.

48-D

49. A CPA should reject management advisory services engagement if

a. It would require 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.

49-A

50. After preliminary audit arrangements have been made, an engagement

confirmation letter should be sent to the client. This letter usually should not
include
a. An estimate of the time to be spent on the audit work by audit staff and
management.
b. A reference to the auditor’s responsibility for the detection of errors and
irregularities.
c. A statement that management advisory services would be available upon request.
d. A statement that management letter will be issued outlining comments and
suggestions as to any procedures requiring the client’s attention.

50-C

ANSWER KEY
1. C 11. C 21. A 31. C 41. D
2. B 12. A 22. B 32. D 42. C
3. B 13. A 23. C 33. B 43. A
4. B 14. D 24. C 34. D 44. A
5. A 15. B 25. C 35. D 45. B
6. B 16. D 26. C 36. D 46. C
7. D 17. B 27. B 37. D 47. C
8. C 18. D 28. D 38. D 48. D
9. C 19. D 29. C 39. A 49. A
10. C 20. D 30. B 40. A 50. C