MAS 1 Overview | Lester M.

Camaso

Overview of Management Advisory Services

Management Advisory Services (MAS) refers to that area of accounting work concerned with providing
advice and technical assistance to help clients improve the use of their resources to achieve.

CPA Licensure Exam (CPALE)

As per BOA Resolution 2016-114, MAS is one of the six subjects of CPA Licensure Examination. Among
others are:

 Financial Accounting and Reporting

 Advanced Financial Accounting and Reporting
 Auditing
 Taxation
 Regulatory Framework for Business Transactions

MAS consists of seventy (70) multiple choice questions in which 30% are theoretical part and 70% are
practical/practice/competence part. The subject covers the candidates’ knowledge of the concepts,
techniques and methodology applicable to management accounting, financial management and
management consultancy.

Competencies required by CPALE

 Know and understand the role of information in accounting, finance and economics in
management consultancy and in management processes of planning, controlling and decision
making.
 Working knowledge to comply with the various management accounting and consultancy
engagements.
 Communicate effectively matters pertaining to the management accounting and consultancy
work that will be handled.

Overview of Management Accounting

Management Accounting is concerned with providing information to managers for use within the
organization. Management accounting helps managers perform three vital activities – planning, controlling,
and decision making.

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Distinction between Management Accounting and Financial Accounting

Financial Accounting Management Accounting

Reports to those outside the organization such Reports to managers inside the organization for
as shareholders, creditors, tax authorities, and planning, controlling, and decision making.
regulators.

Emphasizes financial consequences of past Emphasizes decisions affecting the future.

activities.
Emphasizes objectivity and verifiability. Emphasizes relevance.

Emphasizes precision Emphasizes timeliness.

Emphasizes companywide reports. Emphasizes segment reports.

Must follow GAAP/IFRS. Need not follow GAAP/IFRS

Mandatory for external reports. Not mandatory.

Three (3) Pillars of Management Accounting

1. Planning involves establishing goals and specifying to achieve them.

a. Budget is a detailed plan for the future that is usually expressed in formal quantitative
terms.
2. Controlling involves gathering feedback to ensure that the plan is being properly executed or
modified as circumstances change.
a. Performance report compares budgeted data to identify and eliminate sources of
unsatisfactory performance.
3. Decision making involves selecting a course of action from competing alternatives.

THE PLANNING AND CONTROL CYCLE

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Management skills

1. Strategic Management Skills

a. Strategic Management is the continuous planning, monitoring, analysis and assessment
of all that is necessary for an organization to meet its goals and objectives.
b. A strategy is a “game plan” that enables a company to attract customers by distinguishing
itself from competitors.
c. A customer value proposition is a reason for customers to choose a company over its
competitors. Successful customer value propositions include:
i. Customer intimacy – companies that adopt a customer intimacy strategy strive
to understand and respond to individual customer needs better than competitors.
ii. Operational excellence – companies that adopt an operational excellence
strategy strive to deliver products and services faster, more conveniently, and at a
lower price than competitors.
iii. Product leadership – companies that adopt a product leadership strategy strive
to offer higher quality products than competitors.
2. Enterprise Management Skills
a. Risk management, as defined by The Institute of Internal Auditors (IIA)’s glossary is a
process to identify, assess, manage, and control potential events.
b. Once a company identifies its risks, perhaps the most common risk management tactic is
to reduce risks by implementing specific controls.
c. Risk is the possibility of an event occurring that will have an impact on the achievement of
objectives. Risk is measured in terms of impact and likelihood (The IIA Glossary).
d. Internal control – The Committee on Sponsoring Organizations (COSO) model defines
internal control as a process, effected by an entity’s board of directors, management, and
other personnel, designed to provide reasonable assurance regarding the achievement of
objectives relating to operations, reporting, and compliance.
3. Process Management Skills
a. Business process is a series of steps that are followed in order to carry out some task in
a business.
b. Value chain consists of the major business functions that add value to a company’s
products and services.
c. Continuous improvement is often necessary just to remain competitive.
d. A number of management approaches to continuous improvement are widely used,
including:
i. Lean (Just-in-time) production is a management approach that organizes
resources such as people and machines around the flow of business processes
and that only produces units in response to customer orders.

LEAN PRODUCTION

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1. In Lean Production, parts and materials are pulled through the assembly
process as needed.
2. In the push approach used in traditional production control systems, work
in process is pushed through the factory from one workstation to the next
with little regard to when it is actually needed. In a push system, the
overriding concerns are to keep all the workstations busy and to produce
as much as possible so as to spread the costs of investments in equipment
and other assets across many units.
ii. Theory of Constraints (TOC) is based on the insight that effectively managing
the constraints is a key to success.
1. A constraint (bottleneck) is anything that limits the ability of an individual
or organization to attain its objectives.
2. The constraint in a system is determined by the step that has the smallest
capacity.
3. Improvement efforts should usually be focused on the constraint.
4. If the capacity of the current bottleneck is increased enough, the constraint
will shift. Improvement efforts should then be shifted to the new constraint
(bottleneck).
iii. Six Sigma is a process improvement method that relies on customer feedback
and fact-based data gathering and analysis techniques to drive process
improvement.
1. Six Sigma relies on customer feedback and fact-based data gathering and
analysis techniques to drive process improvement.
2. The term Six Sigma refers to a process with an error rate of less than
3.4 per million. This is close to perfection—zero defects.
3. The DMAIC (Define, Measure, Analyze, Improve, and Control) framework
is often used in conjunction with Six Sigma.
a. The define stage defines the scope and purpose of the project,
the flow of the current process, and the customer’s requirements.
b. The measure stage gathers baseline performance data
concerning the existing process and narrows the scope of the
project to the most important problems.
c. The analyze stage identifies the root causes of the problems that
were identified during the measure stage.
i. The analyze stage often reveals non-value-added
activities that should be eliminated wherever possible.
d. The improve stage is where potential solutions are developed,
evaluated, and implemented to eliminate non-value-added
activities and any other problems uncovered in the analyze stage.
e. The control stage ensures that problems remain fixed and that
the new methods are improved over time.
4. Measurement Skill is a data-driven analysis to complement the manager’s understanding of
strategy, risk, and business process. It provides data-driven answers to different challenging
questions such as: “how well am I performing relative to my plan?”.
5. Leadership skills
a. Critical to career development for simple reason that organization are managed by people.
b. Managers must possess strong leadership skills if they wish to channel their co-workers’
efforts toward achieving organizational goals.
c. 6 skills to develop to become an effective leader:
i. Be technically competent within your area of expertise and knowledgeable of
company’s operations.
ii. Be a person of high integrity.

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iii. Understand how to effectively implement organizational change.

iv. Strong communication skills.
v. Motivating and mentoring others.
vi. Effectively manage team-based decision process.

Organizational Structure

1. Centralization is the retention of decision-making authority by management.

2. Decentralization is the grant of decision-making authority by management to lower-level
employees.
3. An organizational chart shows how responsibility is divided among managers and it shows formal
lines of reporting and communication. An organization chart also depicts line and staff positions in
an organization.
4. A person in a line position is directly involved in achieving the basic objectives of the organization.
5. A person in a staff position is indirectly involved in achieving those basic objectives. Staff positions
support line positions, but they do not have direct authority over line positions.
6. The Chief Financial Officer (CFO) is the member of the top management team who is responsible
for providing timely and relevant data to support planning and control activities and for preparing
financial statements for external users.
7. Traditionally, controller is the chief accounting officer and heads the accounting department that
reports to the CFO. Corporate controllers now often play four diverse and challenging roles within
the organization:
a. Steward: Managing risk and preserving assets
b. Operator: Running an efficient and effective finance operation
c. Strategist: Influencing the future direction of the company
d. Catalyst: Helping to drive execution
8. The treasurer is generally concerned with the organization’s financial matters such as raising and
management of cash.

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International certifications in management accounting

Institute of Management Accountant (IMA), named 2017 Professional Body of the Year by The
Accountant/International Accounting Bulletin, is one of the largest and most respected associations focused
exclusively on advancing the management accounting profession. Globally, IMA supports the profession
through research, the CMA® (Certified Management Accountant) program, continuing education,
networking, and advocacy of the highest ethical business practices. IMA has a global network of more than
100,000 members in 140 countries and 300 professional and student chapters. Headquartered in Montvale,
N.J., USA, IMA provides localized services through its four global regions: The Americas, Asia/Pacific,
Europe, and Middle East/India. For more information about IMA, please visit www.imanet.org.

Ethical Standards in Management Accounting

IMA STATEMENT OF ETHICAL PROFESSIONAL PRACTICE
(adapted from IMA)
COMPETENCE
 Maintain professional expertise.
 Follow laws, regulations, and standards.
 Provide information and recommendations that are accurate, clear, concise, and timely.
 Recognize and communicate professional limitations.
CONFIDENTIALITY
 Don’t disclose confidential information except when authorized or legally required.
 Ensure that subordinates do not disclose confidential information.
 Do not use confidential information for unethical or illegal advantage.
INTEGRITY
 Avoid actual or apparent conflicts of interest.
 Refrain from any conduct that would prejudice carrying out duties ethically.
 Refrain from actions that discredit the profession.
OBJECTIVITY
 Communicate information fairly and objectively.
 Disclose all information that could be expected to influence a user’s understanding.
 Disclose delays or deficiencies in information, processing, or internal controls.

Globalization

Globalization is driven by the digital revolution that facilitates international commerce by providing
capabilities that did not exist relatively few years ago. It is also driven by such political events as the fall of
Soviet Union in the 1990s, the growth of China as an economic power, the emergence of other economic
powers (e.g., India and Brazil), the expansion of the European Union, and the creation of other regional
free trade zones.

These technological and political factors are intertwined with social changes. They include (a) greater
concern for the rights of women and minorities; (b) the advance of multilingualism; and (c) the convergence
of tastes in fashion, music, and certain other cultural factors.

Accordingly, these factors favor globalization by reducing trade barriers, reducing costs of coordination,
increasing economies of scale; and encouraging standardization and global branding.

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Strategies for Global Marketing Organization

There are four (4) broad generally recognized strategies:

1. A multinational (transnational) strategy adopts a portfolio approach. Its emphasis is on national

markets because the need for global integration is not strong, and the driving forces of localization
(cultural, commercial, and technical) predominate.
a. The product is customized for each market and therefore incurs higher production costs.
b. This strategy is most effective given large differences between countries.
c. Also, exchange rate is reduced when conducting business in the manner.
d. Transnational firms lack a national identity, but they rely on a decentralized structure for
management and decision making.
i. They tend to be more aware of local customs and market forces because they take
much more of their input from a local or regional management team.
2. A global strategy regards the world as one market. Among its determinants are ambition,
positioning, and organization.
a. The product is essentially the same in all countries with some adaptions.
b. Faster product development and lower production costs are typical.
c. The disadvantage of this strategy is the complexity of integration and coordination needed
to keep operations running smoothly.
d. Global firms are primarily managed from one central country. Even though their products
may be sold throughout the world, their headquarters and most of their policy decisions are
set from central base of operations.
i. Global firms plan, operate, and coordinate their activities worldwide. Thus, a global
firm secures cost or product differentiation advantages not available to domestic
firms.
3. In an international strategy, the value chain is controlled and marketed from the organization’s
home country, but products are sold globally.
a. The product is essentially the same in all countries.
b. Decision making is centralized with the home country.
c. This strategy allows strong control of operations with less coordination from host countries.
d. The disadvantage of this strategy is that the value chain in a host countries to control
operations.
4. A multilocal or multidomestic strategy uses subsidiaries in the host countries to control
operations.
a. The product is adapted for each country.
b. Decision making is usually left to the subsidiaries.
c. This strategy allows for customization for local markets and the use of local resources.
Also, less coordination is required by decision makers in the home country.
d. The disadvantage of this strategy is higher costs and lower economies of scale.

Two (2) compromise strategies adopt elements of the board strategies.

1. A glocal strategy seeks benefit of localization (flexibility, proximity, and adaptability) and global
integration.
a. Successful telecommunications firms are examples of balancing these elements of
localization and global integration.
b. Local responsiveness is indicated when local product tastes and preferences, regulations,
and barriers are significant.
c. Global integration is indicated when demand is homogeneous and economies of productive
scale are large.

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2. A regional strategy combines elements of multinational, international, and multilocal strategies.

The goal of this strategy is to create regional products and a regional value chain.

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