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MULTIPLE CHOICE
Basic concepts
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 (rpcpa)
1. C
? The most desirable sequence in a decision-making process.
The normal decision-making process follows the sequence of a reasoned scientific
conclusion, as follows: set objectives, identify constraints, gather information, identify
alternative, evaluate alternative, and choose the best alternative. On the given, the
sequence is 3-2-4-6-1-5 (choice-letter c is correct.)
2 A
? A statement on when should a CPA reject management advisory services engagement.
A CPA advisor may render study, analyses, research, interpretation, comment, and the
like except for one authority which exclusively belongs to the manager- that is, the power
to make decisions. Therefore, any advisory engagement that requires him to make
decisions should be rejected. Hence, choice-letter a is the answer.
Choice-letter b, c and d are all acceptable. He may accept non-accounting and
non-finance related engagements as long as he has the competence to do it, and follows
the other MAS practice standards in the process of undertaking the advisory engagement.
His recommendations may be subject to a review by the client who hires his services and
who will be studying further his recommendations. Even if he is an auditor of the financial
statements of the prospective client or any of its affiliates or subsidiaries, a CPA may
serve as an advisor to the client.
3. D
? The one that is not a characteristic of management advisory services.
Choice-letter d is correct, it is not a characteristic of management advisory services.
MAS is not repetitive as far as the same client is concerned. Once a particular
problem area of operations is solved, the same is not expected to recur least the
solution applied is ineffective which would in return speak of the incompetence of the
CPA-Advisor.
Choice-letters a, b, and c are some of the characteristics of management
advisory services. MAS is broad in concept, involves problem-solving affecting the
future operations of the client, and its beneficiary of service is the management.
Other characteristics of MAS are: it does not adhere to GAAP, it deals with specific
organizational problems, it uses knowledge and techniques adopted from different
fields of science, and it is also covered by the standards governing the practice of
accountancy.
4. C
? The one that is not the characteristics of the management advisory services.
The area of management advisory services has some of the following characteristics:
it involves decisions for the future (choice-letter a), it covers a wide area of
managerial interests (choice-letter b), it deals with a specific problem where an
experts help is required (choice-letter d).
However, it uses few junior staff as the engagement is highly technical in nature
and requires the competence of the advisor (choice-letter c is incorrect, and
therefore is the correct answer); it is not repetitive nor recurring in nature; it applies
technical knowledge of various fields of discipline; and, it is not governed by GAAP.
5. D
? The one that is not a characteristic of management services.
All of the given choices are areas that relate to management services, such as
design and/or installation of accounting system, financial analysis for project
feasibility study, and cost analysis of major investment decisions. Therefore, the
correct answer is choice-letter d.
6. B
? The one that is not a characteristic of management services.
Choice-letter b is the correct answer because MAS engagements are not recurring
in nature. Choice-letters a, c, and d are all characteristics of management
services. MAS encompasses a wider variety of assignments than in audit. MAS
pinpoints action to be taken, the benefit of which will be received in the future, and
MAS requires a lesser need for junior assistance.
7. Management services of certified public accountants cover all of the following, except
A. Project feasibility studies.
B. System design development and implementation.
C. Organizational development and planning.
D. Audit, tax, and legal services. (rpcpa)
7. D
? The area not covered in the practice of management advisory services.
The practice of management advisory services (MAS) does not cover those
traditional and originating fields of accountancy such as auditing, tax services, and
legal services. These traditional areas of services by CPAs have already been in
existence before the advent of the MAS practice, and have already developed
extensive and highly technical body of knowledge where a specialized area of
competence is available. Choice-letter d is the correct answer.
MAS includes all areas of serving management outside the traditional services of
auditing, tax, and legal practice. MAS is done in the areas of finance and accounting,
industrial engineering, marketing, production, logistics, human resources, information
and communications technology, operations research, quality control, customer
services, marketing, and others which are of concern to management.
8. A certified public accountants 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.
(rpcpa)
8. C
? The choice which is not covered in the practice of management services.
Choice-letters a, b, and c are covered in the practice of management services.
Change in management engagement deals with minimizing organizational uncertainties
for better preparation and use of resources which will lead to favorable results Re-
Chapter 1 MAS Practice Standards 9
engineering job is for a strategic and structural change in the entirety of the organization
or any of its major systems and processes with the aim of simplifying work and process
for better productivity, lesser error and produce favorable economic results.
Computerization engagements relate to the dynamic field of information technology.
Choice-letter c refers to external auditing which is a traditional and specialized field of
accountancy that had already developed its core professional principles, standards,
systems and approaches that make it a stand-alone specialized field of accountancy, and
not covered in the MAS engagements.
A. VII, VI, V, IV, III, II and I. C. IV, III, V, VI, II, VII, and I.
B. III, IV, V, VI, VII, I, and II. D. IV, V, III, VII, II, VI, and I. (rpcpa)
9. D
? The general steps in undertaking management advisory services engagement.
Choice-letter d is correct. The management advisory services begins from
negotiating the engagement, then preparing for and starting the engagement,
conducting the engagement, preparing and presenting the report and
recommendation, implementing the recommendation, evaluating the engagement,
and post-engagement follow-up.
10. The activities in a management systems 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.
10. B
? The sequence in a management systems control process.
The control process referred to here is the operating control process. It is done after
the planning process is competed.
The general steps followed in the operating control process are: establishment of
control standards (or standards of performance), measurement of actual
Chapter 1 MAS Practice Standards 10
11. C
? A statement describing what a CPA practitioner in MAS should do.
A CPA-consultant and a CPA-advisor should not take responsibility for making
decisions and policy judgments in MAS engagements (choice-letter c is the correct
answer).
A professional CPA-advisor has a duty of identifying the problems of the client-
organization in a specific or general business sense, analyzing the causes and
effects of the problem, developing and recommending remedial alternatives, and
assisting in the execution and evaluation as to the effectiveness of the alternative
chosen. Still, the CPA-advisor should not make decisions on behalf of the client. The
power to make decisions rests solely on the hand of the management and not of the
advisor.
Choice-letter a is incorrect because the CPA-Advisor should not exercise
administrative control over, but rather coordinate with, the clients staff. Choice-letter
b is also incorrect because a CPA-Advisor should not encourage dependence of the
client on the consultants staff but rather should orient the client on the technique of
avoiding and/or solving the same problem in the future. Choice-letter d is incorrect
because a CPA-Advisor should always maintain impartiality in his professional
conduct and therefore should not act as if he an employee of the client.
12. 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. (rpcpa)
12. D
? An area not related to the performance of management services.
Choice-letter d is the correct answer because performing management functions
and making decisions are not areas rendered in the practice of management
services. A CPA-Advisor who is an independent outsider in the organization only
advises management and he remains as such in the performance of MAS
Chapter 1 MAS Practice Standards 11
assignments. Once, the CPA-Advisor makes decisions for and on behalf of his client,
he ceases to be an advisor and automatically becomes a manager.
Choice-letters a, b, and c are all areas related to the performance of
management services such as, but not exclusive to, introducing new ideas,
concepts, and methods to management; improving existing policies, methods, and
procedures; and, performing special studies, preparing recommendations, and
formulating plans and programs for his client.
13. D
? The one that is not a qualification of a CPA in MAS practice.
Choice-letter d is correct, being the auditor of the client does not automatically
qualify the CPA to render MAS practice to his client. This is because the primary
criterion in accepting auditing is independence while the paramount criterion in
accepting MAS engagement is competence.
Choice-letters b, c, and d are qualifications of a CPA in MAS practice.
Choice-letters a and b relate to primary standard of competence while choice-
letter c relates to the secondary standards of independence and integrity which
should always be maintained by the CPA in his professional dealings.
14. C
? The one that is not a true statement.
Choice-letter c is not a true statement. MAS serves not only in the area of
accounting and finance but in all other areas of management interests ranging from
human relations, marketing, channels of distribution, design and engineering,
customer services, industrial engineering, logistics, strategic planning, and other
areas of management.
Choice-letters a, b, and d are all true statements with regard to MAS
practice. Choice-letter a refers to independence in the MAS practice, choice-letter
b refers to compliance and adherence to professional ethics save for those that
specifically relate to the expression of opinion on financial statements under audit,
and choice-letter d relates to the MAS Practice Standard of client benefit.
Chapter 1 MAS Practice Standards 12
15. D
? Identify the given statements as true or false.
Choice-letter d is correct. Statement 1 is true. Statement 2 is false because MAS
consultancy, like MAS advisory services, applies analytical processes and
approaches. Statement 3 is false because the client, inasmuch as he owns the
business organization, always reserves the right to make decisions with respect to
the firm and that does not exclude deciding for or against the continuance or
interference in the advisory services conducted by an independent professional
service provider, such as a CPA engaged in MAS practice.
16. B
? Identify the given statements as true or false.
Choice-letter b is correct. Statement 1 is false because it violates the standard of
competence and client benefit. Statement 2 is true. Statement 3 is false because
project feasibility study does not only relate to finance and accounting and is
therefore included in the non-finance and accounting services.
17. D
? The one that does not refer to the standard of competence.
Choice-letter d is the correct answer because it refers to the standard of
independence where a CPA advisor should not make decisions for and on behalf of
his client or acts as if he is an employee or officer of his client.
Choice-letter a, b, and c all relate to the standard of competence.
Competence, which is the paramount standard of all the nine (9) MAS practice
standards, requires the CPA advisor to have the technical skills, expertise, and
mastery to render the professional work demanded by the management. He has a
reputable understanding and applications of concepts, principles, and methods
needed in a given business advisory service. His skills are acquired through formal
education (i.e. schooling), on-the-job training, researches, attendance in seminars,
conventions, fora, discussions, etc., actual experience in MS work, self-study, and
other modes of obtaining competence. Competence is the ability to identify clients
needs and problems (not the symptoms), use analytical approach and processes
throughout the engagement process, apply technical knowledge, communicate
findings, conclusions and recommendations, and assist in the implementation of the
clients decision.
18. D
? The mode of acquiring competence in management advisory services.
Competence relates more to the skills of doing things with reasonable accuracy at
the least possible time and cost but with the optimum benefits. Competence may be
acquired through formal and informal education. Formal education is evidenced by
diplomas, certificates, recognition, and similar proof of getting knowledge.
Informal education relates more to the process of acquiring competence in a
given area by actual performance of the CPA-Advisor. Competence may be acquired
from auditing and other experience, actual performance of management advisory
Chapter 1 MAS Practice Standards 14
services, researches, studies, and similar modes of getting knowledge and skills.
Choice-letter d is correct.
19. A
? The true statement with regard to management advisory services.
Choice-letter a deals with competence. It is the ability of a MAS practitioner to apply
analytical approach and processes using his technical knowledge and expertise
which are required through formal education, training, under study, apprenticeship,
on-the-job training, professional experience, advanced studies, researches, and the
like. Statement letter a is a true statement..
Choice-letter b is false because a CPA is not automatically qualified to render
management advisory services even if he had earned his MBA and PhD degrees; the
qualification is competence and not merely educational attainment. Choice-letter c
is incorrect because competence is not equated to having excellent and scholarly
preparation. Competence refers to the ability to perform tasks with the required
mastery of knowledge, skills and expertise and come out with the optimum output at
the least cost involved. Competence is not heavily related to academic preparation
but more on the hands-on experience of a person. Choice-letter d is also incorrect
because having completed the necessary college degree in accountancy and hurdle
the CPA licensure examinations do not automatically qualify a CPA to handle
management advisory services inasmuch as competence in practice is the primary
consideration in accepting a management advisory services engagement.
20. 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 losses 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. (rpcpa)
20. D
Chapter 1 MAS Practice Standards 15
? The one that will not impair independence of a CPA in the rendition of management
services.
Independence is impaired when the CPA is influenced as to his decision. In his
professional endeavor, the CPA must act with impartiality and fairness, devoid of bias
that may produce distorted information leading to inappropriate management
decisions. However, when the CPA does not extend his services beyond the
presentation of recommendation of giving advice, he does not impair his
independence, and choice-letter d is correct.
Choice-letters a, b, and c are all situations where the practicing CPA looses
his independence, such as performing decision-making services for his client, or
performing services wherein he is in effect acting as an employee of the client, or
acts in a manner as if he is advocating for the interest of his client.
21. A
? The statement(s) that pertain to MAS standards on client benefit.
Statements 1 and 3 are directly related to the MAS standards on client benefit.
Statements 2 relates to planning and supervision standard while statement 4 deals
with the standard on understanding with the client. Hence, the correct answer of
choice-letter a.
22. Mr. Rey Carlos, a CPA firms 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 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 clients business
is in the best position to render decisions for the client and should do so.
Chapter 1 MAS Practice Standards 16
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 judgement 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.
(rpcpa)
22. C
? A statement about independence in consultancy.
Choice-letter b is the statement about independence in consultancy. Choice-letters a,
and d are incorrect statements with regard to independence because they require the
CPA-advisor to make decisions on behalf of the client.
23. After preliminary audit arrangement 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 auditors responsibility for the
detection of errors or irregularities.
C. A statement that management advisory services would
be made available upon request.
D. A statement that management letter will be issued
outlining comments and suggestions as to any procedures requiring the clients
attention. (rpcpa)
23. C
? The one not included in a confirmation letter sent to the client after an audit engagement.
Among the choices given, what is not to be found in an audit confirmation letter is a
statement that management advisory services would be made available upon request
(choice-letter c).
Choice-letter a, b, and d are included in an audit confirmation letter.
24. A
? A statement that is applicable to the Revised Accountancy Law.
Chapter 1 MAS Practice Standards 17
25. A
? The false statement with regard to management advisory services.
Choice-letter a is a false statement because CPAs who are in the practice of MAS
are still covered by the provisions of the Accountancy Act of 2004 and the Code of
Ethics for Professional Accountants since they are still CPAs in the practice of their
profession, except those provisions that pertain to the expression of opinion of
financial statements under audit.
Choice-letter b, c, and d are true statements with regard to the practice of
management advisory services.
(rpcpa)
26. B
? The statement that is not acceptable.
A CPA-advisor should not make a decision on behalf of the management.
Additionally, the CPA advisor should comply with provisions contained in
Accountancy Act of 2004 and the Code of Ethics for Professional Accountants and
those guidelines mentioned in the MAS Practice Standards.
Choice-letter b is not acceptable for a CPA-Advisor to share with a client any
classified, material, confidential, or substantial information regarding another client.
Chapter 1 MAS Practice Standards 18
This relates to the rule and ethics of confidentiality with the client of which the CPA
is bound to observe and uphold. Choice letter b is the correct answer.
Choice-letters a, c, and d are all acceptable for a CPA advisor to do because
they do not violate any provisions in the Accountancy Act of 2004, Code of Ethics for
Professional Accountants, and does not run counter to any of the MAS Practice
Standards.
27. D
? Identify the given statements as true or false.
Choice-letter d is correct. Statement 1 is true. Statement 2 is false because the
filed of management advisory services is open to all professionals and non-
professionals alike who have the necessary competence and the trust of the
manager. Statement 3 is true.
done