Exercise 3 – MAS Practice Standards

Management Consultancy

Instruction Select the Best Answer.

1. People who make information-based decision go through a series of fundamental steps in their
decision-making process.
i. Evaluate alternative iv. Gather appropriate information
ii. Identify constraints v. Choose the most acceptable alternative
iii. Set objectives vi. Identify alternative
The most desirable sequence in the above steps is:
A. iv, ii, iii, vi, i, v
B. ii, iii, iv, vi, i, v
C. iii, ii, iv, vi, i, v
D. ii, iii, vi, iv, i, v

2. A CPA should reject management advisory services engagement if

a. It would require him to make management decisions for an audit client
b. The proposed engagement is not accounting related
c. His recommendations are to be subjected to a review by the client
d. He audits the financial statements of a subsidiary of the prospective client.

3. Which of the following is not a characteristic of management advisory services?

i. MAS is broad in concept
ii. MAS involves problem-solving affecting the future operations of the client
iii. Beneficiary of service is management
iv. MAS is repetitive as far as the same client is concerned

4. The following characterize management advisory services, except

a. Involves decisions for the future
b. Broader in scope and varied in nature
c. Utilize more junior staff than senior members of the firm
d. Relate to specific problems where expert help is required

5. 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 pinpoints 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

6. A certified public accountant’s scope of management services is broad and covers all of the following
except
a. Change in management engagements
b. Computerization engagements
c. Audit engagements
d. Re-engineering engagements

7. A management advisory services engagement generally involves the following activities in what
order?
I. Post engagement follow-up
II. Implementing the recommendation
III. Conducting the engagement
IV. Negotiating the engagement
V. Preparing for and starting the engagement
VI. Evaluating the engagement
VII. Preparing and representing the report and recommendations

a. VII, VI, V, IV, III, II, and I

b. III, IV, V, VI, VII, I, and II
c. IV, III, V, VI, II, VII, and I
d. IV, V, III, VII, II, VI, and I

8. The activities in a management system’s control process can be grouped into four
i. Measurement of actual performance
ii. Deciding and implementing corrective action
iii. Determining standards of performance
iv. Comparing actual performance versus standards and analyzing results
The above activities must be done in this sequence
a. iv, iii, ii, i
b. iii, I, iv, ii
c. I, iii, iv, ii
 Exercise 3 – MAS Practice Standards
Management Consultancy

d. Iii, iv, i., ii

9. As a consultant, the CPA practitioner should

a. Exercise administrative control over the client’s staff to avoid unnecessary delays in
implementations
b. Encourage dependence of the client on the consultant’s staff so as to pinpoint clear responsibility
in implementing system
c. Not to take responsibility for making decisions and policy judgments in MAS engagements
d. Conduct his engagement as if he is a member of the client’s organization

10. Which of the following is not an area related to the performance of management services by
independent accounting firms?
a. Introducing new ideas, concepts and methods to management
b. Improving existing policies, methods and procedures
c. Performing special studies, preparing recommendations, and formulating plans and programs
d. Performing management functions and making decisions

11. Which of the following is not a qualification of a CPA in MAS practice?

a. Familiarity with the client’s financial accounting and internal control systems
b. Analytical experience in problem-solving
c. Professional independence, objectivity, and integrity
d. Auditor of the client

12. Which of the following statements is not true?

a. In the rendition of MAS, independence must be observed so as to maintain the essential requisite
of impartiality and objectivity.
b. All provisions of the code of professional ethics are applicable in the practice of MAS except
those rules related to the expression of an opinion on financial statements.
c. MAS serves only in the areas of accounting and finance.
d. Before accepting an engagement, a practitioner should notify the client of any reservation he has
regarding anticipated benefits.

13. Identify the following statements as true or false

Statement 1: MAS principally involves the consultative services to management in his decision
making
Statement 2: MAS consultation, unlike MAS engagement, generally involves advise of
information by a CPA in which an analytical process is applied
Statement 3: Because the CPA must be independent, he must not allow the client to
participate in any phase of his engagement

Statement 1 Statement 2 Statement 3

a. True True False
b. False True False
c. False False False
d. True False False

14. Indicate whether the following statements are true or false

Statement 1: A CPA firm’s primary purpose of performing MAS services is to enable the staff
members to acquire the necessary continuing education in all areas of business.
Statement 2: In management audit, a team with a mix of members who are accountants and
non-accountants will produce a desirable combination of specialists and will offer
a cross fertilization of ideas from different business fields.
Statement 3: An area of MAS which is directly related to accounting and finance functions is
project feasibility study.

True False
a. Statement 1 Statement 2
b. Statement 2 Statement 1
c. Statement 3 Statement 2
d. Statement 1 Statement 3

15. The following statements refer to competence of CPAs in management advisory services, except
a. In concept, it refers to the technical qualification of the practitioner and his ability to supervise and
evaluate the quality of work of is staff assigned to the engagement to be responsible for the
successful completion of the project.
b. It is acquired by education, self-study, attendance to professional development courses, actual
experience in MS work, and research.
 Exercise 3 – MAS Practice Standards
Management Consultancy

c. It is the ability to identify client’s needs, use analytical approach and process, apply technical
knowledge, communicate recommendations and assist in implementation.
d. It must be retained in the rendition of MAS work and it can be impaired if the CPA performs
decision-making for the client or acts as employee of the client.

16. Competence in management advisory services is acquired by

a. Education
b. Auditing and other experience
c. Actual performance of management advisory services
d. All of the above

17. Which of the following statements is true?

a. Adequate training and experience in both analytical approach and process in the particular
undertaking are requisites for the CPA to be involved in a management service engagement.
b. A CPA with MBA and PhD degrees is automatically qualified to render management services.
c. Competence as a standard in the rendition of management services by a CPA may be equated to
having scholarly preparation to include the usual baccalaureate degree, an MBA and other post-
graduate studies
d. A certified public accountant by virtue of having the necessary academic preparation and by
hurdling the licensure examinations required to have a CPA license can readily render
management services to the public.

18. Which of the following will not impair the independence of a CPA in the rendition of management
services?
a. The CPA performs decision-making services for his client
b. The CPA performs services wherein he is in effect acting as an employee of the client
c. The CPA loses his objectivity and acts in a manner as if he is advocating for the interest of his
client
d. The CPA does not extend his services beyond the presentation of recommendations of giving of
advice

19. These statements relate to MAS standards

i. A practitioner is to notify the client of any reservation he has regarding anticipated benefits.
ii. Throughout the engagement, there ought to be systematic critical review of accomplishments and
work should be done within the framework of the Code of Ethics and other professional
standards.
iii. During the engagement, should there be significant changes between cost and anticipated
benefits, the client should be informed.
iv. Before the engagement, the practitioner must make arrangement with, and inform the client on
significant matters related to the engagement in writing.

Of these statements, which pertains to the practice standard on client benefit?

a. Statements i and iii only
b. All statements
c. Statement i only
d. Statements i, iii and iv only

20. Mr. Rey Carlos, a CPA firm’s partner-in-charge of quality assurance and review is arguing with Mr.
Fortuna, the consulting partner, regarding the question on independence as Mr. Fortuna is presently
rendering consulting services to T. Ang and Nga Co., an audit client of the firm. Related to this issue
of independence, all of the following statements are not valid except
a. Independence is never sacrificed for as long as the auditor/consultant is correct in his
implementation of his recommendation for the client.
b. A CPA who renders both audit and consulting services to a client by virtue of his
competence/expertise and extensive knowledge of the client’s business is in the best position to
render decisions for the client and should do so.
c. The client is the ultimate decision maker and the auditor and/or consultant should not make
decisions for the client.
d. It is up to professional judgment and discretion of the auditor/consultant to render decisions for
the client for as long as his professional fees are commensurate to the benefit that the client will
derive from the engagement.

21. After preliminary audit arrangements have been made, an engagement confirmation letter should be
sent to the client. The letter usually would not include:
a. An estimate of the time to be spent on the audit work by audit staff and management.
b. A reference to the auditor’s responsibility for the detection of errors or irregularities.
c. A statement that management advisory services would be made available upon request.
 Exercise 3 – MAS Practice Standards
Management Consultancy

d. A statement that management letter will be issued outlining comments and suggestions as to any
procedures requiring the client’s attention.

22. The Revised Accountancy Law incorporates the Code of Professional Ethics for CPAs. The provision
of management advisory services is among the areas for public accounting. It is, however, not
exclusive to CPAs. Considering these premises, which of the following statements is applicable?
a. Management advisory services as a field of practice is considered as an integral part of public
accounting thus, the Code of Professional Ethics for CPAs covers management advisory
services.
b. CPAs in the practice of audit and management consulting services may advertise and charge
contingent fees.
c. The practice of management advisory services should not be extended to existing audit clients
since this will adversely affect the CPA’s independence.
d. CPAs in the practice of management advisory services are not bound by the Board of
Accountancy Law but are bound by the said law in the practice of audit

23. Which of the following statements is false?

a. CPAs provide management services to go around the ethical constraints as mandated by the
Accountancy Act.
b. Businesses hire management consultants to help define specific problems and develop solutions.
c. Included in the practice of consulting is the provision of confidential service in which the identity of
the client is concealed.
d. CPAs performing management services may be considered to be in the practice of management
consulting

24. Which of the following statements is not acceptable?

a. A CPA represents three major players in the industry in rationalizing the industry’s incentive
before the government public hearings.
b. A CPA shares with a new and substantial client information regarding another client belonging to
the same industry.
c. A CPA provides consulting services to an existing audit client.
d. A CPA offers and provides consulting services to two major competing clients.

25. Indicate the statements as either true or false

Statement 1: CPAs in MAS practice must observe the general provisions of the Code of
Professional Ethics for CPAs, as well as the provision thereof of CPAs in Public
Accounting, except those provisions of expression of opinion on financial
statements.
Statement 2: Management consultancy is an exclusive field of practice for CPAs and is
regulated by law.
Statement 3: Although management services (MS) extend beyond the traditional accounting
services, MS practitioners are still bound by the rules of professional ethics in the
practice of accounting in general

Statement 1 Statement 2 Statement 3

a. True False False
b. False True True
c. False True True
d. True False True

*******The End*******