Basic Considerations in

Management Advisory Services

(MAS)
Areas of MAS Practice, Its Organization and Management
Definition of Terms
Consulting Services Practitioner - Any AICPA member holding out as a CPA while
engaged in the performance of a Consulting Service for a client, or any other
individual who is carrying out a Consulting Service for a client on behalf of any
Institute member or member's firm holding out as a CPA.
Consulting Process - The analytical approach and process applied in a Consulting
Service. It typically involves some combination of activities relating to
determination of client objectives, fact-finding, definition of the problems or
opportunities, evaluation of alternatives, formulation of proposed action,
communication of results, implementation, and follow-up.
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.
Definition of Terms
Consulting Services -Professional services that employ the practitioner's technical
skills, education, observations, experience, and knowledge of the consulting
process. These services include:
Consultations, in which the practitioner's function is to provide counsel in a short time
frame, based mostly, if not entirely, on existing personal knowledge about the client, the
circumstances, the technical matters involved, client representations, and the mutual intent
of the parties. Examples of consultations are reviewing and commenting on a client prepared
business plan and suggesting computer software for further client investigation.
Advisory services, in which the practitioner's function is to develop findings, conclusions, and
recommendations for client consideration and decision making. Examples of advisory
services are an operational review and improvement study, analysis of an accounting system,
assisting with strategic planning, and defining requirements for an information system.
Implementation services, in which the practitioner's function is to put an action plan into
effect. Client personnel and resources may be pooled with the practitioner's to accomplish
the implementation objectives. The practitioner is responsible to the client for the conduct
and management of engagement activities. Examples of implementation services are
providing computer system installation and support, executing steps to improve productivity,
and assisting with the merger of organizations.
Definition of Terms
Transaction services, in which the practitioner's function is to provide services related to
a specific client transaction, generally with a third party. Examples of transaction services
are insolvency services, valuation services, preparation of information for obtaining
financing, analysis of a potential merger or acquisition, and litigation services.
Staff and other support services, in which the practitioner's function is to provide
appropriate staff and possibly other support to perform tasks specified by the client. The
staff provided will be directed by the client as circumstances require. Examples of staff
and other support services are data processing facilities management, computer
programming, bankruptcy trusteeship, and controllership activities.
Product services, in which the practitioner's function is to provide the client with a
product and associated professional services in support of the installation, use, or
maintenance of the product. Examples of product services are the sale and delivery of
packaged training programs, the sale and implementation of computer software, and the
sale and installation of systems development methodologies.
Contributing Factors to the Growing Demand for
Management Consultants
Demand for specialists to manage non-core activities brought
about by globalization and information technology.
Continued demand for IT spending i.e. internet, e-commerce;
Growth of consulting due to increasing demand from
governmental associated organizations. Examples:
outsourcing works and offering tenders to private firms for
capital projects.
Three types of problems that a business firm may encounter and that
may necessitate the hiring of management consultant

1. Corrective problem. Involves a situation in which condition have deteriorated or

worsened which requires urgent action. A consultant is expected to suggest corrective
actions that will return the situation to its previous state.
2. Progressive problem. This involves an existing situation that can be improved. The
consultant is expected to provide considerable improvements to the situation.
3. Opportunistic problem. This involves a situation in which a future opportunity exists.
For example, a firm might have excessive cash available. The consultants
responsibility is to search out and recommend opportunities for more effective use of
the funds.
Consultation Vs. Engagement
Consultation consists of providing advice and information during
a short time frame. This advice and/or information is provided
orally during one or more discussions with the client.

Engagement consists of that form of management advisory or

consulting service in which an analytical approach and process is
applied in a study or project. This approach typically involves:
Engagement
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, and
6. Implementing the solution, if appropriate.
Characteristic of Management Advisory
Service
1. Broad in scope
2. Varied in nature
3. Beneficiary of services is management rather than for third parties
4. Involves problem solving that affects the future operations
5. Non-recurring
6. Highly technical- require highly qualified staff and lesser need for
junior assistance
Areas of Management Advisory Service
A. Accounting and Finance Functions
Financial Accounting
Management Accounting System and Design
Financial Management
B. Non-finance and Non-accounting Services
General Management
Project Feasibility Studies
Organization and personnel
Industrial Engineering
Marketing
Operating Research
Nature and Role of MAS in Independent
Accounting Firm
To provide advice and technical assistance which should provide for
client participation in analytical approach and process. Specifying this
as the proper role recognizes both the appropriate place of MAS and
the realities of practice. This is the only basis on which the work
should permit it to be done.
Objectives in Engaging in MAS
To utilize the essential qualifications it has available to provide advice
and technical assistance which will enable client management to
conduct its affairs more effectively
Stages in Management Advisory Service
Engagements
I. Negotiating the engagement
Ascertain the real problem and what is required to reach a solution
Identify the end product
Agree on the role to be performed by the CPA
Agree on the basis for establishing and billing fees
Confirm understanding in writing
To minimize misunderstandings and to assist in better administration of the engagement,
the preparation of a proposal letter is advisable which generally includes:
1. Objectives and benefits of the engagement
2. Scope of work and role of CPA
3. The approach
4. The project organization
5. Fees and billing
6. Firm qualifications
Stages in Management Advisory Service
Engagements
II. Engagement planning
-After the proposal is accepted, a detailed work plan is developed
which will become the blueprint of the project
Stages in Management Advisory Service
Engagements
III. Conducting a consulting assignment
A. Problem identification and desired outcome
A problem is said to exist when the observed behavior of a system or process violates
the bounds of reasonable expectations
Procedures:
1. Problem finding- involves the identification of the reasonable explanations
pertaining to a system or process and allowable tolerances from these reasonable
expectations.
2. Problem stating- involves the formulation of a comprehensive and valid statement of
the problem. The final statement of the problem should contain such facets as the
objectives to be achieved by the solution of the problem; the problems scope,
intensity, time dimensions and location; human elements involved; the support system
and tracking systems related to the problem solution; and the institutional process for
managing the problem.
Stages in Management Advisory Service
Engagements
III. Conducting a consulting assignment
B. Identification of suitable and accurate sources of information
-Internal Sources: people, client documentations and defining relationships among
people, departments and functions
-External Sources: industry reports, distributors, customers, etc.
C. Data analysis and diagnosis
-Decision Level Analysis- depicts the varied interrelationships among the decision
made throughout the segments and levels of organization.
-Input/ Output Analysis- a problem is analyzed in terms of inputs and outputs
-Structured Analysis- gain clear understanding of the inputs, processing, and outputs of
the organization.
-Less Structured Analysis- brainstorming and Delphi approach
Stages in Management Advisory Service
Engagements
D. Solution development
1. Generation of solution alternatives
2. Evaluation of solution alternatives
3. Choice of the preferred solution alternatives
4. Detailed development of the selected solution
E. Preparation and presentation of the report and recommended
solution
-The recommended solution should be presented in a persuasive manner if the
consultant expects to obtain the clients acceptance of the recommendation.
Stages in Management Advisory Service
Engagements
F. Implementation
1. Development of work plan
2. Establishment of controls over the implementation activities
3. Selection and training of needed personnel
4. Installation of needed physical facilities
5. Development of standard and documentation
6. Testing of the solution being implemented
7. Follow-up and evaluation of the implemented solution
G. Follow-up evaluation of the implementation solution
- Report should be prepared as written documentation of the evaluation and
presented to management.
Stages in Management Advisory Service
Engagements
IV. Evaluating the engagement and post-engagement follow-up
-Evaluation is necessary if constant improvement and refinement in the quality
of future services is to be achieved. Evaluation will formally cover: proposal,
engagement program, work program schedule, source data and
documentation, reports and results.
-Post-engagement follow-up is necessary to uncover deficiencies and make
necessary modifications.
Structure of Management Advisory Service
Team or Division
Level 1. Partners, Principals, Directors
Typically the most experienced and is responsible for the success of the engagements
Perform practice planning, administer and develop practice, consult with top-client managers,
approve engagement reports and manage client crises.
Level 2. Senior Managers, Managers, Supervisors
Perform week-to-week management of the engagements and are responsible for identifying new
client prospects
Plan engagements, evaluate and supervise consultants, write proposals, review working papers
and reports, consult with client managers, and serve as an expert in applied knowledge area
Level 3. Senior Consultants, Seniors
Supervise the daily work of the younger staff
Level 4. Associate Consultants, Staff
Usually have less than 2 years of experience or fresh graduates