Areas of Management Advisory Part II

Management Consultancy Services by CPA’s :

1. Traditional Services
2. Emerging Consultancy Services

Traditional Services
1. Managerial Accounting

Examples:

a) Financial statement analysis

b) Budgets and their preparation
c) Cost Analysis planning and control
d) Variance analysis
e) Cost analysis for managerial decisions
f) Development and installation of responsibility accounting and evaluation of responsibility accounting and evaluation
of responsibility center
g) Establishment of internal reporting system
h) Assistance in preparation of reports to employees, stockholders, SEC and others

2. Design and appraisal of accounting system

Involves:

a) Development of an accounting system for a newly- organized firm

b) Revision, partial or complete, of an existing accounting system
c) Extension of the present accounting system to cover new business activities
d) Accounting machines installation
e) Internal control studies and installations

3. Financial Management- related services

Examples are:

a) Study of working capital requirements

b) Study of methods of financing asset and acquisitions
c) Credit and collection practice studies and advice
d) Analysis of capital investment proposals
e) Study of alternative methods of financing expansion
f) Survey of pension, retirement and profit sharing plans
g) Preparation of feasibility studies for new projects
h) Valuation of capital stock of companies for purposes of merger or sale.

4. Project Feasibility Studies

Emerging Consultancy Services

5. Global Risk Management Solution

This involves the totality of risks:

o financial
o operational and systems
o strategic

It also covers:

o determination of critical risk that the firm faces

o development of recommendation to reduce risk exposure
o identification of opportunities for growth expansion

Areas of risk management services include:

 6. Transaction services

Involves services related to:

o mergers
o acquisitions
o divestitures
o joint ventures
o spin-off
o strategic alliance

For example: Due diligence, services to uncover potential financial and strategic risks and rewards.

7. Financial Advisory Services

Examples: services related to investment banking, fraud and dispute analysis, intellectual property disputes, etc.

8. Project Finance and Privatization.

Examples:

(1) development of the commercial structure for a deal, including risk mitigation and contracts
(2) development of a financial structure to get the right mix of financial instrument in an tax efficient package.

9. Valuation services

Includes service that guide clients through complex business transactions such as:

o acquisitions or divestiture of investment

o debt structuring and finance- raising
o entry to major stock exchange
o mergers

10. Business Recovery Services

- CPA’s provide services to troubled business by emphasizing on the implementation and rationalization and
recovery programs designed to rebuild value.

Examples: creditor services, business regeneration, hands on turnaround, insolvency/executor services, insurance services such
as collectability of reinsurance recoveries, collection, disputed claims, etc.
 11. Dispute Analysis and Investigation

Under this category are:

o environmental analysis
o real estate damage
o investigative services
o construction disputes
o economic and financial analysis

12. Computer Risk Management

Examples: Implementing mission critical business systems such as electronic commerce, network sensitivity, etc.

13. Application Software Selection and Implementation

o The management consultant assists clients in prioritizing their needs.

Determining the Scope of Services

Management Advisory Services Criteria:

1. Responsibility to establish scope of services

2. Independence
3. Competence
4. Requirements for Specialization
5. Identification and resolution of client’s basic problems
6. Referrals
7. Code of professional ethics

Types of Clients Served

The proposed six client types are:

1. Contact clients
2. Intermediate clients
3. Primary clients
4. Unwitting clients
5. Indirect clients
6. Ultimate clients
Groups of clients that CPAs can provide MAS:

o Private – owned business firms

o Government agencies and organizations
o Not-for-profit nongovernment organizations
o Professional associations
o Others

HOW CONSULTING ADDS VALUE

The Decision to Use a Consultant

 Many are asking why should a business manager ask the advice of an independent consultant? Hiring consultant
involves:
a) an immediate financial cost, e.g., daily time charges of the team assigned to the projects, expenses incurred
in undertaking marketing research, etc.
b) Disruption of a manager’s routine, e.g., need to dedicate management time for briefing sessions and regular
review meetings.

Critical responsibilities for the consultant:

 Maintain client’s confidence

 The belief that the consultancy exercise has something of value to offer.

Management consultants must constantly ask three fundamental questions:

1. What can I offer to the client business that will enhance its performance and help it achieve its objectives?
2. Why will my contribution be more valuable than that which existing managers and potential recruits, can contributes?
3. How can I communicate to the client business that what I offer is valuable?

The actual output of a consulting exercise centers is on providing one or more of the following:

o Provision of information
o Provision for specialist expertise
o Provision of new perspective
o Provision of support for internal arguments
o Provision of support in gaining a critical resource
o Facilitating organizational change