Management Advisory Services 1

MAS Concepts, Practices, and Standards

I. Basic Concepts
 Management advisory Services (MAS) refers to that practice of accounting concerned with providing
advice and technical assistance to help management improve the use of resources in achieving
organizational goals. The certified public accountant who practices an MAS work is called as an advisor
or consultant.
 Management advisory services by independent accounting firms can be described as the function of
providing professional advisory (consulting) services, the primary purpose of which is to improve the
client’s use of its capabilities and resources to achieve the objectives of the organization.
 Management advisory services, as a public accounting practice, is sometimes referred to as
management services, business advisory services, business and financial advisory services, and other
similar names.
 The client in MAS practice is the management. Managers are entrusted with organizational resources to
make more wealth. Managers have the power to make decisions in doing their fiduciary and
proprietary functions. The quality of their decisions would define the organizational survival, growth,
and leadership.
 The job of an advisor is to provide advice and technical assistance to manager. An advisor is an
independent CPA who is not a member of the organization but has the trust and confidence of the
manager.
 MAS involves the use of analytical approach and processes. It typically involves more than an incident
effort devoted to some combination of activities in determining client objectives, fact-finding,
opportunity, or problem definition, evaluation of alternatives, formulation and follow-up. Analytical
approach and process also refers to the systematic, objective and rational method of solving
organizational problems. It involves, at a professional level, the ability to find facts and define the basic
problems (not the symptoms), identify alternative solutions, and to adopt the most applicable solution
under the circumstances.
II. Areas of MAS Practice
 All services rendered to management except those in the areas of auditing, legal services, and taxation
are included in the professional service of management advisory services.
 The advisory services rendered by CPAs may be divided into two areas – (1) finance and accounting
services and (2) non-finance and non-accounting services.
III. Professional standards and MAS Practice Standards
 Professional standards include the divine laws, the constitution, the Accountancy Act of 2004 (Republic
Act No. 9298), and the Code of Ethics for Professional Accountants in the Philippines.
MAS Practice Standards:
1. Personal Characteristics – In performing Management Advisory Services, a practitioner must act
with integrity and objectivity and be independent in mental attitude.
2. Competence – Engagements are to be performed by a practitioner having competence in the
analytical approach and process, and in the technical subject matter under consideration.
3. Due Care – Due professional care is to be exercised in the performance of Management Advisory
Services engagements.
4. Client Benefit – Before accepting an engagement, a practitioner is to notify the client of any
reservations he has regarding anticipated benefits.
5. Understanding with the client – Before undertaking an engagement, a practitioner is to inform his
client of all significant matters related to the engagement.
6. Planning, Supervision, and Control – Engagements are to be adequately planned, supervised and
controlled.
7. Sufficient Relevant Data – Sufficient relevant data is to be obtained, documented, and evaluated in
developing conclusions and recommendations.
8. Communication of Results–All significant matters relating to the result of the engagement are to be
communicated to the client.

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 IV. Characteristics of an MAS Engagement
 Service is for management
 Scope is broad
 Future orientation
 Non-recurring
 Highly qualified staff
 Diversity

V. MAS Engagement Process

 Engagement Negotiation (Get into an agreement) – It involves preliminary discussion with the client to
determine whether the proposed engagement should be pursued to reach a common understanding
with the client about the engagement.
 Engagement Planning (Plan) – A work program which contains a list of tasks to be done in achieving the
engagement objectives should be developed.
 Engagement Execution (Act) – This stage involves data gathering and data analysis
 Presentation of Engagement Results (Report) –The findings, analyses, conclusions, and
recommendations relative to the engagement must be presented for useful and more reasonable
decisions.
 Implementation of recommendation (Assist) – The advisor’s participation is limited on providing
technical advice and assistance to the client to maintain objectivity.
 Engagement Evaluation (Check) – It is done to assess the quality of the work and to make any
improvements or refinements in work quality for future engagements.
 Post- engagement follow-up (Connect) – It is made after a sufficient amount of time has elapsed to
ensure that the systems, procedures, and other recommendations implemented by the client are
executed as designed.
 The MAS Proposal letter – a formal written communication by the advisor to a prospective client for
approval. It sets forth the purpose, scope, general plan and procedures, anticipated results and other
terms of the proposed engagement.
 The MAS Engagement Program – a written detailed plan of work to be performed in carrying out the
MAS Engagement. It is usually prepared by the advisor and is reviewed with the client. It could also be
jointly developed by the CPA and the client.

Management Accounting Environment

I. Basic Concepts
 Managers need relevant, detailed, exhaustive, confidential, and timely information to make more
reasonable economic decisions. These information are normally not provided in the general-purpose
financial information released by financial accountants.
 The systems and processes used to gather data, process data, and provide useful quantitative
information to management is management accounting.
 The head of a management accounting group in an organization is called management accountant.
Sometimes, he is called as the Vice President for Finance, Chief Financial officer, Accounting Manager,
or Budget Director. Traditionally, a management accountant is called as the controller (or comptroller).
 Management accounting is the application of appropriate techniques and concepts in processing the
historical and projected economic data of an entity to assist management in establishing a plan for
reasonable economic objectives and in the making of a rational decision with a view towards achieving
these objectives. (AAA Committee on Management Accounting)

II. Controllership
 Managers make decisions. They make decisions in all phases of their managerial functions. The
functions of management are :
1. Planning – setting goals and selecting strategies
2. Executing - carrying out the activities of the business as planned
3. Controlling – Evaluating the results of operation
4. Decision Making – Selecting among the different alternatives
 Management Accounting focuses more on the areas of planning and controlling.

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  The seven (7) basic functions of a controller are: (PREGPET)
1. Planning and Controlling
2. Protection of Assets
3. Reporting
4. Evaluation
5. Government relations
6. Economic appraisal
7. Tax administration

III. Treasurership
 Treasurership deals with money, cash, or wealth of an organization. A treasurer knows the sources of
money and exercises prudence in using the money of an organization.
The functions of a treasurer are: (PSBCIII)
1. Provision for capital
2. Short-term borrowings
3. Banking and custodianship
4. Credit and collection
5. Investor relations
6. Investments
7. Insurance

IV. Financial Accounting and Management Accounting

 The basic differences between financial accounting and management accounting are as follows:
Financial Accounting
 Time Orientation  Historical in nature/Past/Passive
 Guiding Principle  GAAP, Reliability and Precision
 Reports/Content  Reports are wholistic
 Purpose  Reports are for general-purpose
 Unifying Concepts  Accounting equation A=L+E
 Users  External Users
 Types of data used  Primarily financial
 Format  Highly Aggregated (Condensed)
 Frequency  Annually and sometimes
Quarterly as required by
regulators
Management Accounting
 Deals with the future/Active
 User’s Requirement, Relevance and Timeliness
(Does not use GAAP)
 Reports are segmented
 Reports are for management use only
(specific purpose)
 No unifying equation (Management’s decision making)
 Internal Users
 Financial and Non-financial
 Very detailed
 As frequently as needed by management

V. Institute of Management Accountants – Code of Ethics

 Competence
- Maintain appropriate level of expertise
- Perform duties in accordance with relevant laws, regulations and technical standards
- Provide information that are accurate, clear, concise and timely
- Recognize and communicate professional limitations
 Confidentiality
- All information should be confidential except when authorized, legally or professionally required.
- Inform relevant parties about the level of confidentiality of information.
- Do not use information for unethical or illegal advantage
 Integrity (Internal Honesty)
- Mitigate conflict of interest
- Avoid conduct that will prejudice carrying out duties ethically
- Abstain from engagements that may discredit the profession
 Credibility / Objectivity (External Honesty)
- Communicate information fairly and objectively
- Disclose all relevant information for decision making
- Disclose delays and/or deficiency in information
 Resolution of Ethical Conflicts

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