BASIC CONSIDERATION IN MAS 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 CONTROL O MS CONSULTANCY 1. 2. 3. 4. 5.
Growth in size and complexity of business firms. Complexities in managing and conducting a business. Lack of competent staff. Trend towards industrialization Need for adequate and timely information in management decisionmaking. 6. Development of techniques for the solution of management problems and businessmen’s awareness of their usefulness REASONS FOR HIRING MANAGEMENT CONSULTANTS 1. 2. 3. 4. 5. 6. 7.
Help define specific problems and develop solutions. Provide specialized skills and experience. Provide confidential service in which the identity of the client is concealed Train client personnel Help improve intra-company communications Render an independent opinion 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. 2. 3. 4. 5. 6. 7. 8.
Services are rendered for the management Involves problem solving Relates to the future Broad in scope Involves varied assignments Engagements are usually non-recurring. Engagements require highly qualified staff 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: -
Counselling management in its analysis, planning, organizing, operating, and controlling functions. Reviewing and suggesting improvement of policies, procedures, systems, methods and organizational relationship. 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 a. AREAS WHICH ARE NORMALLY RELATED TO THE ACCOUNTING AND FINANCE FUNCTION 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 a. Development of standard cost system b. Cost analysis and control c. Variance analysis 2. Financial management a. Establishment of capital budgeting procedures b. Study of the cost of capital and cost of debt c. Financial analysis for project studies d. Establishment of operating and cash budgets e. Valuation of common stocks for purposes of mergers and sale B. AREAS WHICH ARE NOT NORMALLY RELATED TO THE ACCOUNTING AND FINANCE FUNCTIONS: 1. General management consultation a. Management or operations audit b. Measurement of operating performance c. Mergers and acquisitions studies
d. Development of compensation programs e. Pension plan review f. Special studies on industry potential g. Long range planning 2. Project Feasibility Studies - involves financial. Technical, and marketing evaluation of proposed projects. 3. Organization and Personnel a. Review of existing organization structure b. Organization and administrative manual preparation c. Job evaluation and salary administration d. Development of personnel rating programs e. Retirement plan studies f. Studies of office cost reduction systems g. Determining cost of alternatives in collective bargaining agreements 4. Industrial Engineering a. Production, planning, scheduling and control b. Plant layout studies c. Inventory management studies d. Materials control system design and development e. Preventive maintenance system design and development f. Development of work studies g. Purchasing management including value analysis. 5. Marketing a. Product profitability analysis b. Pricing policy determination c. Market forcasting d. Distribution cost analysis e. Salesmen’s Incentive compensation evaluation.
6. Operations Research - involves the use of mathematical techniques such as linear programming, PERT/CPM, queuing theory, simulation etc to solve operational problems. The services listed above are not necessarily exhaustive nor complete. The practitioner may offer other services not mentioned above depending on the practitioner’s competence, experience, technical ability, and professional integrity to meet or deliver such other services. MAS CLASSIFICATIONS BASED ON REQUIRED EXPERTISE 1. Usual Services: a. Evaluation of form of business organization b. Analysis of financial and operating statements c. Design and installation of accounting systems d. Design of filing systems for storing accounting records e. Suggestions for improvements in internal control f.
Establishment of control to assist management and expedite the audit process
g. Preparation of insurance claims in case of business interruption h. Research and evaluation of alternative methods of handling a transaction for its effect on finance and tax consequences i.
Assistance in the preparation of forecast and budgets
j.
Presentation and explanation of statements
k. Assisting clients in purchase and sale of business l.
Testifying on client’s behalf
m. Determination of the effect of various employee compensation plans net income n. Aid in labor union negotiations. 2. Somewhat specialized services a. Assisting in the installation of a mechanized accounting system b. Making a cost analysis of operations c. Finding sources of capital and figuring the approximate cost of small business loans, bond issue and stock issuance
d. Giving advice on dividend policy and plans for expansion e. Calculation on government contracts and allocating cost in compliance with reporting requirement f.
Advising on accounting and tax matters relative to estate planning
g. Surveying credit losses h. Assisting in bankruptcy and receivership proceedings i.
Recruiting accounting and bookkeeping personnel for the client
j.
Preparing an analysis of paper flow
k. Presenting and analyzing the pros and cons of various retirement and profit-sharing plans l.
Advising on various wage incentive plans
3. Highly Specialized Services a. Reviewing the organization structure b. Auditing management policies c. Conducting motion studies d. Surveying an industry of trade for current trends e. Evaluating the desirability of a particular area for plant location f.
Preparing market analysis
g. Reviewing an insurance program h. Advising on data processing allocation ADVANTAGES OF CPAs 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 equipped with technical know-how in accounting and taxation.
ANALYTICAL APPROACH AND PROCESS 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 In case the client requests the consultant to proceed, the latter may also be involved in: 6. Planning and scheduling actions 7. Advising and providing technical assistance in implementing 3 BROAD STAGES 1. Analysis stage- consist of ascertaining the pertinent facts and circumstances, seeking and identifying objectives, and defining the problem or opportunity for improvement 2. Design stage- consists of evaluating and determining possible solutions and presenting findings and recommendations 3. Implementation stage- consist of planning and scheduling actions and advising and providing technical assistance in implementing. ROLE OF CONSULTNANTS AND CLIENTS IN MAS ENGAGEMENTS
IN FULL SCOPE ENGAGEMENTS. These covers all the 7 phases in the analytical process. CONSULTANT: limited to that of an advisor; in the implementation stage,his role is merely to provide technical assistance.
IN SPECIAL STUDY ENGAGEMENTS. The client seeks only an impartial and objective study of case and the resulting recommendations. These involve only the first 5 stages in the analytical process. CONSULTANT: to provide through the first five phases of the analytical process, apply objective judgement to the facts, and present findings and recommendations to the client for decision and further action CLIENT: to supply pertinent information and to make decision on the case. Any action beyond the point of decision is solely the responsibility of the client.
IN INFORMAL ADVICE. Its structure is informal and no presumption should exist that an extensive study has been performed. CONSULTANT: to respond as practicable at the moment and express the basis for the response.
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 The MAS practitioner shall undertake only those engagements which he or his firm can reasonably expect to complete. 2. Due Professional Care The MAS practitioner shall exercise due professional care when performing an engagement 3. Planning and Supervision The MAS practitioner shall adequately plan and supervise an engagement in a manner that provides reasonable assurance that the work is conducted in accordance with the understanding with the client and with the professional standards and rules of conduct 4. Sufficient relevant data The MAS Practitioner shall obtain sufficient relevant data to complete the engagement in accordance with the understanding with the client and to provide a reasonable basis for making conclusions and formulating recommendations in relation to the engagement 5. Forecast The MAS practitioner shall not permit his name to be used in connection with any forecast of future transactions in a manner that may lead to the belief that the practitioner vouches for the achievability of the forecast 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 the engagement. The practitioner should maintain his independence to enable him to render his professional judgement and opinions with objectivity. His main role is that of an adviser. 2. Understanding with the client A written or oral understanding should be reached with the client concerning the nature, scope, and limitations of the engagement 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. The practitioner should notify his client of any
reservations he may have concerning the realization of the anticipated benefits. 4. Communication of results The MAS practitioner should communicate to the client his principal findings, conclusions, recommendations or other results of the engagement including major facts and assumptions used, limitations, reservations or other qualifications. STAGES IN MAS ENGAGEMENTS 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 engagement 7. Post enagagement follow-up These stages constitute the specific activities involved in MAS engagement cycle which in general terms are the following: 1. Pre engagement considerations 2. Engagement planning 3. Engagement management and execution 4. Engagement conclusion
