MANAGEMENT ADVISORY SERVICES
As a consultant, the CPA practitioner should
Overview of MAS Practice
1. In financial accounting, certain rules and regulations
must be followed on how financial statements must be
presented to the reader. In managerial accounting, no
such restrictions generally apply because it is:
a. An entirely different field that need not observe the
broad guidelines in financial accounting.
b. Designed to provide management with non-financial
information for decision-making.
c. Designed to provide accounting and other financial
data to assist management in making business
decisions.
d. A discipline that does not require preparation of other
financial statements.
2. Which type of authority do management accountants
generally exercise?
a. Functional c. Line
b. Company d. Staff
3. Management accounting is an integral part of the
management process. As such, it provides essential
information for the following objectives except
a. Maintaining the current level of resource utilization as
well as internal and external communication.
b. Measuring and evaluating performance.
c. Planning strategies and controlling current activities
of the organization.
d. Enhancing objectivity in decision-making.
4. To distinguish between management accounting and
financial accounting, the following statements are
correct, except
a. Management accounting, in view of its various
integrated recipients should have a separate data
recording and retrieval system from financial accounting.
b. Financial accounting is bound by GAAP, and
management accounting need not be in conformity with
GAAP.
c. Financial accounting can be regarded as the process
while management accounting can be regarded as the
product of the process.
d. Management accounting output must be released on
time so as not to erode its usefulness; Financial
accounting output can still be useful even when delayed.
5.
a. Exercise administrative control over the clients staff
to avoid unnecessary delays in implementation.
b. Encourage dependence of client on the consultants
staff so as to pinpoint clear responsibility in
implementing systems.
c. Not take responsibility for making decisions and policy
judgments in MAS engagements.
d. Conduct his engagement as if he is a member of the
clients organization.
6. Which of the following is not a characteristic of
management services?
a. A wider variety of assignments are encountered in
MAS than in audit.
b. MAS engagements are recurring.
c. MAS pinpoint actions to be taken, the benefits of
which will be received in the future.
d. In MAS engagements, the nature of work involved
requires a lesser need for junior assistance.
7. Controllership has attained special recognition in
corporate management as business expands in
complexity and reach, and as the controller exerts
influence for management to take organizations goals.
Controllership and treasurership constitute corporate
finance. These are among the controllers traditional
functions:
1. Tax management.
2. Financial reporting and interpretation.
3. Credit management.
4. Sourcing and investing of funds.
5. Reporting to government regulatory agencies.
6. Risk management.
7. Economic appraisal.
8. Planning for control.
a. All eight items.
b. Items 1, 2, 5, 7, and 8 only.
c. Items 1, 2, 3, 4, 5, 7, and 8 only.
d. 2, 3, 5, and 7, and 8 only.
8. A management advisory services engagement involves
the following activities in what order?
I. Post-engagement follow-up.
II. Implementing the recommendation.
III. Conducting the engagement. a. Refinancing a P60,000 long-term mortgage with a
short-term note.
IV. Negotiating the engagement.
b. Collecting P20,000 of short-term accounts receivable.
V. Preparing for and starting the engagement.
c. Purchasing P100,000 of merchandise inventory with a
VI. Evaluating the engagement.
short-term accounts payable.
VII.Preparing and presenting report and
d. Paying P40,000 of short-term accounts payable.
recommendations.
12. The ratio of analytical measurements which
a. VII, VI, V, IV, III, II and I.
measures the productivity of assets regardless of capital
b. III, IV, V, VI, VII, I and II.
structure is
c. IV, III, V, VI, II, VII, and I.
d. IV, V, III, VII, II, VI, and I. a. Current ratio. c. Quick (acid test) ratio.
b. Debt ratio. d. Return on total assets.
9. These statements relate to MAS practice standards
13. The ratio that measures a firm's ability to generate
1. A practitioner is to notify the client of any reservation
earnings from its resources is
he has regarding anticipated benefits.
a. Days sales in inventory.
2. Throughout the engagement, there ought to be a
b. Sales to working capital.
systematic critical review of accomplishments and work
c. Days' sales in receivables
should be done within the framework of the code of
d. Asset turnover.
ethics and other professional standards.
14. Which of these ratios are measures of a companys
3. During the engagement, should there be a significant
profitability?
change between cost and anticipated benefits, the client
should be informed. 1. Earnings per share 5. Return on assets

4. Before the engagement, the practitioner must make 2. Current ratio 6. Inventory turnover
arrangements with, and inform the client on significant
3. Return on sales 7. Receivables turnover
matters related to engagement, in writing.
4. Debt-equity ratio 8. Price-earnings ratio
Of these statements, which pertain to the practice
standard on client benefit? a. All eight ratios. c. 1, 3, 5, 6, 7, and 8 only.
a. Statements 1 and 3 only. b. 1, 3, 5, and 8 only. d. 1, 3, and 5 only
b. All statements.
c. Statement1only. 15. Which of the following statements is correct?
d. Statement 1, 3 and 4 only.
a. An increase in a firms inventories will call for
10. The chief management accountant called controller additional financing unless the increase is offset by an
traditionally performs these functions except: equal or larger decrease in some other asset account.

a. The establishment and implementation of the b. A high quick ratio is always a good indication of a
financial planning process. well-managed liquidity position.

b. Financial and management reporting and c. A relatively low return on assets (ROA) is always an
interpretation. indicator of managerial incompetence.

c. Protection of company resources and economic d. A high degree of operating leverage lowers the risk by
evaluation. stabilizing the firms earnings stream.

d. Preparation of proposals for product promotions. 16. Last year, a business had no long-term investments;
this year long term investments amount to P100,000. In
a horizontal analysis the change in long-term
Financial Statement Analysis investments should be expressed as

11. Mabuhay Corp. has current assets of P180,000 and a. An absolute value of P100,000, and an increase of
current liabilities of P360,000. Which of the following 100%
transactions would improve Mabuhays current ratio?
b. An absolute value of P100,000 and an increase of c. They arent useful because decision making is too
1,000% complex.

c. An absolute value of P100,000 and no value for a d. They give clear signals about the appropriate action to
percentage change take.

d. No change in any terms because there was no
investment in the previous year.
17. A company has a current ratio of 2 to 1. The ratio
will decrease if the company
19. All of the following statements are valid except
a. The short term creditor is more interested in cash
flows and in working capital management that he is in
how much accounting net income is reported.

a. Receives a 5% stock dividend on one of its marketable
securities.
b. Sells merchandise for more than cost and records the
sale using the perpetual inventory method.
c. Pays a large account payable which had been a
current liability.
d. Borrow cash on a six-month note.
b. If the return on total assets is higher than the after-
tax cost of long-term debt, then leverage is positive, and
the common stockholders will benefit.
c. The results of financial statements analysis are of
value only when viewed in comparison with the results
of other periods or other firms.
d. The inventory turnover is computed by dividing sales
by average inventory.

20. If the ratio of total liabilities to equity increases, a

18. How are financial ratios used in decision making? ratio that must also increase is

a. They can help identify the reasons for success and a. Times interest earned.
failure in business, but decision making requires b. Total liabilities to total assets.
information beyond the ratios. c. Return on equity.
d. The current ratio.
b. They remove the uncertainty of the business
environment.