MANAGEMENT

CONSULTANCY
OUTLINE FOR MANAGEMENT
CONSULTANCY
CHAPTER I. MANAGEMENT CONSULTANCY
PRACTICE BY CPAs
a. Evolution of MAS, Developing Trends and Future
Prospects
b. Nature of MAS by independent accounting firms,
Rationale of using management consultants,
Independent accounting firms role in MAS and CPAs
objective in engaging in MAS
Management Consultancy Practice by
Certified Public Accounting (CPAs)

CHAPTER 1
I. A.
Evolution of MAS, Developing
Trends and Future Prospects
I. B.
Nature of management
consultancy engagements
I.B.
RATIONALE OF USING
MANAGEMENT ACCOUNTANTS
I. B.
INDEPENDENT ACCOUNTING
FIRM’S ROLE IN MAS
INDEPENDENT ACCOUNTING
FIRM’S ROLE IN MAS
 The role of an independent accounting firm
in performing management advisory
services is“to provide advice and technical
assistance which should provide for client
participation in the 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.”
Determining the Scope of Service

 Responsibility to establish scope of services

The accounting firm has the responsibility to determine the scope of
services it is competent to offer to the public.

 Independence
The accounting firm, when providing MAS should give a particular
consideration to independence. It is suggested that a CPA rendering
MAS and at the same time serving the same client as independent
auditor should not make management decisions or take positions
which might impair his objectivity and independence.

 Competence
Competence in professional work involves both the technical
qualifications of staff personnel and the firm’s ability to supervise and
evaluate the quality of the work performed.
 Identification and resolution of client’s basic problems
The scope of services should be adequate to identify and
resolve the basic client’s problems and not just problem
symptoms.

 Referrals
Referral of MAS work to other independent accounting firm
is another way of developing that firm’s capability.

 Code of Professional Ethics

It is the responsibility of the firm to assure itself that the
nature and scope of the MAS it elects to offer are in
conformity with the code of ethics.
Types of Clients Served
· Contact Clients
The contact client is the person, who first
approaches the consultant and proposes that
the consultant addresses a problem or issue
on behalf of the organization.
· Intermediate clients
These are the members of the organization
who become involved in the consulting
project.
 Primary clients
The primary client is the person or persons who have identified the
problem or issue the consultant and who are the most immediately
affected by it.

 Unwitting clients
These are the members of the organization who will be affected by the
intervention of the consultant. They do not initiate the project and have
no direct or formal control over it. They are not aware that they will be
affected by the project.

 Indirect clients
These are the members of the organization who will be affected by the
intervention of the consultant and who are aware that they will be
affected.

 Ultimate clients
These are the total community that will be affected by the consultant’s
intervention. This will include members of the organization
How Consulting Adds
value
 Provision of Information
 Provision of Specialist Expertise
 Provision of a New Perspective
 Provision of Support in Gaining a Critical
Resource
I.C.
Areas, stages and management of
management consultancy engagements
STAGES OF
MANAGEMENT
CONSULTING
ENGAGEMENT
 In management advisory services,
engagement applied analytical approach
and process which refers to the
systematic, objective and rational method
of solving business problems. It involves a
professional-level ability to ascertain
pertinent facts and circumstance, define
problem, evaluate the alternative courses
of action and present conclusions and
recommendations to solve the problem.
Describe the analytical approach and
process as applied to MAS engagement.

 Analytical approach and process refers to

the systematic, objective and rational method
of solving
business problems. It involves a professional-
level ability to ascertain pertinent facts and
circumstance,define problem, evaluate the
alternative courses ofaction and present
conclusions and recommendationsto solve
the problem.
 Basic stages of a
management consulting engagement

I. Negotiating the engagement

II. Engagement planning
III. Conducting a consulting assignment

a. Problem identification and solution

b. Identification of suitable and accurate sources of information
c. Data analysis and diagnosis
d. Solution development
e. Preparation and presentation of the report and recommended solution
f. Implementation
g. Follow-up evaluation of the implemented solution

IV. Evaluating the engagement and post-engagement follow-up

MAS proposal letter

It is an advisable first step in most MAS engagement. It is

written communication between the CPA and the client setting
forth the terms and conditions of a proposed consultancy
work.

Its contents generally include:

 Objectives and benefits of the engagement.
 Scope of the work and the role of CPA
 Approach to the study.
 Project organization.
 Fees and billing arrangements.
 Firm qualifications, where appropriate
Uses of an Engageme
nt Plan
 Provide a means for arranging, distributing and assigning
responsibility for various segments of an engagement.

 Provide a means of control for determining g whether all segments

of the engagement have in fact been completed.

 Provide the framework for reporting progress of an engagement.

 Facilitate time and efficiency control over personnel assigned to the

engagement.

 Assist in an engagement review by a partner or supervisor.

 Provide the basis for estimating fees.

Advantages of
preparing a proposal letter
 It minimizes misunderstanding between
the CPA and the client.

 It assists in better administration of the

engagement
factors that should be considered in
setting the fee to be charged to clients

 Nature of the MAS job.

 The job’s degree of difficulty and complexity.

 Qualifications of the staff required.

 Time involved.

 Technical importance of the service to the client

Engagement or work 
plan
 It is an operational plan for conducting a
management service engagement and
considered as a blueprint of the
remainder of the project.
Basic contents of
an engagement program
 The objectives and a description of each task to be
accomplished.

 A description of tangible output required at completion of

each task.

 A list of manpower required.

 A list of the personnel assigned.

 The starting and completion dates.

 Project costs
Activities involved in the
problem definition phase
 Identity of the problem.
 Objectives of the problem-solving process.
 Scope of the problem.
 Intensity of the problem
 Time dimensions of the problem
 Location of the problem
 Human elements involved in the problem
 Support systems surrounding the problem
 Tracking systems related to the problem
 Institutional process for managing the problem