Section 4 RA 9298 of the Philippine Accountancy act of 2004 states

“Section 4. Scope of Practice – The practice of accountancy shall include, but not limited to
the following.”

a. Practice of Public Accountancy

b. Practice of Commerce and Industry
c. Practice in Education/Academe
d. Practice in Government

Management Services refers to that practice of professional accountant concerned with

providing advice and technical assistance to help management improve the use of
resources in achieving organizational goals. (Advisor or Consultant)

Areas of MS practice

The genesis of MS is traceable from the traditional CPA services of auditing, tax, and
financial accounting. As an extension to these traditional services, CPAs are also made
involved in activities such as:

• Operational advice – counseling management in its analysis, planning, organizing,

operating and controlling functions.
• Special studies – conducting social studies, proposing plans and programs and
providing guidance and technical assistance in their implementation.
• Organizational analysis – reviewing and suggesting improvement of policies,
procedures, systems, methods, and organizational relationships.
• Innovation – introducing new approaches, methods, techniques, and concepts to
management

Pioneering Services

Finance and accounting

• Financial accounting
• Management accounting
• Financial management

Non-finance and accounting

• General management
• Project feasibility studies
• Organization and personnel
• Industrial engineering
 • Marketing
• Operating research

Emerging MS services

• Management consulting
• Transaction and restructuring
• Risk consulting

MS standards

A CPA is guided by standards in the performance of his professional practice MS practice.

First and foremost, the CPA as a professional is guided by the standards of morality and
amorality, ethics, and rules to preserve integrity. Second, he must also be guided by
technical processes and approaches to provide benchmarks in performance and results.

• Moral standards – are governed by the CPA practitioner's spiritual laws, canons,
societal beliefs, and traditions that define acceptable relationships with his creator
and his environment. Also found in religious writings and those being observed and
practice as societal ways of life revered as traditions, customs and beliefs.
• Ethical standards – relate to the practitioner's relationships with his client, his
colleagues, his fellowmen, and the society in general. The dynamism of these
relationships creates expectations and standards inherently aimed to protect and
foster the interest of the society in general, and that of the profession and the
professional practitioners in particular. In this regard the Philippines CPA
practitioners have the Code of Ethics for Professional Accountants in the Philippines
to respect and comply with.

FUNDAMENTAL PRINCIPLES FOR CPAs IN THE PHILIPPINES

The code of ethics for professional accountants in the Philippines, Section 15, states that
“in order to achieve the objectives for the accountancy profession, professional
accountants have to observe a number of prerequisites or fundamental principles”. The
same code in Section 16, mentions the fundamental principles of integrity, objectivity,
professional competence and due care, confidentiality and professional behavior

• Integrity – A professional accountant should be straightforward and honest in

performing a professional service. (Baseline of MS professional practice)
 • Objectivity. A professional accountant should be fair and should not allow prejudice
or bias, conflict of interest or influence of others to override objectivity.
• Professional Competence and Due Care. A professional accountant should
perform professional services with due care, competence and diligence and has a
continuing duty to maintain professional knowledge and skill at a level required to
ensure that a client or employer receives the advantage of competent professional
service based on up-to-date developments in practice, legislation and techniques.
• Confidentiality. A professional accountant should respect the confidentiality of
information acquired during the course of performing professional-services and
should not use or disclose any such information without proper and specific
authority or unless there is a legal or professional right or duty to disclose.
• Professional Behavior. A professional accountant should act in a manner
consistent with the good reputation of the profession and refrain from any conduct
which might bring discredit to the profession. The obligation to refrain from any
conduct which might bring discredit to the profession requires IFAC (ie, International
Federation of Accountants) member bodies to consider, when developing ethical
requirements, the responsibilities of a professional accountant to clients, third
parties, other members of the accountancy profession, staff, employers, and the
general public.

MANAGEMENT ACCOUNTING
Definition of Management Accounting:

• IFAC: The process of identification, measurement, accumulation, analysis,

preparation, interpretation, and communication of information (both financial and
operating) used by management to plan, evaluate, and control within an organization
and to assure use of and accountability for its resources.
• CIMA: Similar to IFAC's definition, but also includes the preparation of financial
reports for non-management groups like shareholders, creditors, and tax authorities.
• IMA: A profession that involves partnering in management decision-making, devising
planning and performance management systems, and providing expertise in
financial reporting and control to assist management in the formulation and
implementation of an organization’s strategy.
• AICPA: Extends management accounting practice to three areas: Strategic
Management, Performance Management, and Risk Management.
 • ICMA: A management accountant applies professional knowledge and skill in the
preparation and presentation of financial and other decision-oriented information to
assist management in policy formulation, planning, and control of the undertaking

Key Points about Management Accounting:

• It is an integral part of the management process.

• It focuses on providing information for internal decision-making by management.
• It involves the use of both financial and non-financial information.
• It encompasses a wide range of activities, including planning, evaluating, controlling,
and assuring accountability for resources.
• Management accountants are considered "value-creators" who provide information
for future-oriented decisions.
• Management accounting knowledge can be gained from various fields and functions
within an organization.
• The traditional role of a management accountant is the staff function of
controllership, but contemporary changes have led to a more active role in executive
processes.

Key Concepts in Management Accounting:

• Accountability
• Controllability
• Reliability
• Interdependence
• Relevance

Role of Management Accountants:

• Traditionally called “Controller” or "Comptroller"

• May serve in various positions like VP for Finance, CFO, Accounting Manager, Budget
Director, etc
• A Certified Public Accountant (CPA) can also provide management accounting
services

Objectives of Management Accounting Information

1. Profit Measurement: Assessing short-term business performance, typically through
profitability.
 2. Guide for Planning: Ensuring resources and systems align with future needs for
profitability and growth.
3. Standards for Controlling: Preventing errors and correcting deviations from plans
during execution.
4. Basis for Decision Making: Providing quality information for rational decisions that
increase shareholder value.

Attributes and Principles of Management Accounting Information

1. Completeness: Providing all necessary information to avoid errors and increase
costs or damage reputation.
2. Accuracy: Ensuring information is sufficiently accurate for its purpose, without
excessive detail.
3. Clarity: Avoiding miscommunication or communication breakdown through clear
presentation.
4. Confidence: Providing reliable information, especially for strategic forecasts, by
stating underlying assumptions.
5. Communication: Sending the right information to the right person at the right time.
6. Volume: Concise information reduces absorption costs and highlights exceptional
cases.
7. Timing: Providing information at the appropriate frequency to meet the manager's
needs.

Channel of Communication: Choosing the most effective channel (written, electronic,

verbal, etc.) for the situation.

Management Process
1. VISION/MISSION: Set the organization's vision and mission. This defines its purpose
and long-term goals.
2. STRATEGIES: Develop organizational strategy. This is the plan for how to achieve the
goals.
3. STRUCTURES: Design the organizational structure. This outlines how power and
responsibilities are distributed.
4. STANDARDS: Set standards. These are agreed-upon expectations for evaluating
performance.
5. SYSTEMS: Formulate and execute systems. These include processes, rules, and
actions for achieving goals.
 6. REPORTS: Gather reports. This provides feedback to managers on organizational
performance.
7. EVALUATIONS: Make performance evaluations and give rewards. This links actions
to results and motivates individuals.
8. LEARNINGS: Itemize, analyze and validate the learning points. Use these insights to
make necessary adjustments for improvement.

Controllership (1960s and before)

Covers both the Intelligent and behavioral aspects of management

The top manager's role is to guide the organization in creating wealth by unifying a diverse
workforce towards a common goal. This involved utilizing intelligent processes, such as
gathering and analyzing performance data to identify areas for improvement, as well as
behavioral aspects, such as effective communication and motivation to ensure adherence
to organizational standards.

Management decisions were made at all levels of authority, from upper management to
supervisory roles, and included core functions like planning, organizing, staffing, directing,
and controlling.

Decision Hierarchy and Management Functions

Decision Hierarchy

Top Management --> Middle Management --> Supervisory Management

Management Functions

Decision Making

Planning --> Controlling --> Organizing, Directing, Staffing

Functions of Controllership
Planning and controlling Protection of assets
Reporting Economic appraisal
 Evaluation Tax administration
Government relations and reporting

The planning and controlling cycle

In everything that we do, we begin with an end in mind. "Goals" must be established to define
the purpose, directions and activities that need to be accomplished. However, goals are
normally expressed in general, abstract statements. The statement of goals should be
translated into a more specific statement of matters to be accomplished known as
"objectives".

Objectives are more specific expressions of actions and things to be done. Goals and
objectives are sometimes interchanged. The use of the word's goals and objectives

Internal Controls and Controllership

One of the major elements of controllership is internal controls. They are the predefined
values and skills of the organization.

Internal controls comprise the plan of an organization and all its coordinate
methods and measures in order to protect the assets, check the accuracy and
reliability of accounting data, promote operational efficiency, and encourage
adherence to prescribed managerial policies.

Internal Controls
Components Purposes
Structure (Plan of organization) 1. Protection of assests
2. Accuracy and reliability of
accounting data
Policies (methods and measures) 3. Operational efficiency
4. Adherence to policies
Internal controls are categorized into administrative and accounting controls.
Administrative controls encompass the organization's structure, strategies, corporate
values, and policies unrelated to accounting. Accounting controls involve forms, records,
and systems that ensure asset protection and reliable accounting information.

Statements like "no-ID, no-entry" exemplify internal control mechanisms. In

accounting, specific policies are tied to each account to achieve internal control goals.

Eleven fundamental principles of internal controls guide effective management.

These principles fall into three categories: general organizational controls, personnel
controls, and management controls, as illustrated in Fig. 1.4.

The Eleven Cardinal Principles of Internal Controls

General Controls
General controls, also known as organizational controls, are established during the design
of an organization's structure. They aim to minimize errors, inefficiencies, irregularities, and
illegal activities. A key principle in designing organizational structures is the segregation of
transactional responsibilities.

The Five Elements of Transactional Responsibilities

In an ideal internal control system, five distinct responsibilities should be assigned

to different individuals: authorizing transactions, executing authorized transactions,
recording transactions, keep asset custody and special records, and conducting periodic
checks. Combining any two of these functions weakens internal controls, leading to
potential risks such as unsafeguarded assets, unreliable accounting records, policy
violations, and operational inefficiency.

Application Controls
Application controls, complementing general controls, delve into the specifics of
operations, encompassing forms, rules, regulations, standards, schedules, reports,
accountabilities, and other operational policies. They govern transactional approvals,
processes, technicalities of forms and recording, safekeeping of sensitive information, and
internal audit effectiveness.

Ideal internal controls, while desirable, face cost constraints. If implementation

costs outweigh expected benefits, compromises become necessary, potentially impacting
the principles of organizational independence, interdependence, and reliability. This
jeopardizes the system, increasing the risk of errors, irregularities, and illicit activities.

Treasureship
Controllership and treasureship constitute corporate finance. Controllership deals
with records, systems, and processes to attain the objectives of internal controls and good
managing.

Treasurership focuses on managing organizational wealth by sourcing funds and

using resources prudently. Funds come from financing (owners and long-term creditors),
operating (customers and short-term fund providers), and investing (disposal of non-current
assets).

Functions of treasureship Area of concerns

Provision for capital Financing
Investor relations Financing
Short-term borrowings Financing
Banking and custodianship Financing
Credit and collection Financing
investments Strategic investing
insurance Risk management

Financial Accounting and Management Accounting

Financial Accounting Management Accounting
• Historical in nature • Based on forecasts and estimates
• Uses IFRSs(International Financial • Does not use IFRSs
Reporting Standards) • Reports are segmentized
• Reports are holistic • Reports are for management use
• Reports are for general-purposes only
• With unifying equation, A=L+C • No unifying equation
• Focuses on accounting and finance • Multi-disciplinary, also deals with
• Focuses on the process of preparing the areas of knowledge and
the financial statements. disciplines
 • Precision • Concerns with the usefulness of
financial statements
• Timeliness
Financial accounting focuses on historical and estimated data, primarily for external parties.
Reports follow external standards (like IFRS) and represent the company's overall
operations. The core equation is "Assets = Liabilities + Equity."

Management accounting is future-oriented, using estimations and analysis to optimize

resource allocation and minimize risk. General standards are less important, and reports
are detailed, specific, and frequent. It draws on various fields to aid decision-making.

Task or services performed by management accountants.

• Rate & Volume Analysis

• Business Metrics Development
• Price Modeling
• Product Profitability
• Geographic vs. Industry or Client
• Segment Reporting
• Sales Management Scorecards
• Cost Analysis
• Cost Benefit Analysis
• Cost-Volume-Profit Analysis
• Life cycle cost analysis
• Client Profitability Analysis
• IT Cost Transparency
• Capital Budgeting
• Buy vs. Lease Analysis
• Strategic Planning
• Strategic Management
• Advise Internal Financial Presentation and Communication
• Sales and Financial Forecasting
• Annual Budgeting
• Cost Allocation
STANDARDS FOR ETHICAL CONDUCT FOR PRACTITIONERS OF
MANAGEMENT ACCOUNTING AND FINANCIAL MANAGEMENT
The Institute of Management Accountants (IMA) has established standards of ethical
conduct for management accounting and financial management professionals. These
standards emphasize the importance of upholding the highest ethical behavior in service to
their organizations, profession, the public, and themselves. Adhering to these standards,
both domestically and internationally, is crucial for achieving the goals of management
accounting.

Core Principles for Management Accounting and Financial Management Professionals

• Competence
• Uphold professional skills through continuous learning.
• Adhere to laws, regulations, and technical standards.
• Deliver clear, well-supported reports and recommendations based on thorough
analysis.
• Confidentiality
• Protect confidential information, sharing only when authorized or legally required.
• Inform subordinates about confidentiality and ensure they maintain it.
• Avoid using confidential information for personal or third-party gain.
• Integrity
• Avoid conflicts of interest and disclose potential ones.
• Steer clear of activities that could hinder ethical duties.
• Refuse gifts that could influence actions.
• Support the organization's ethical objectives.
• Communicate limitations that could impact judgment or performance.
• Provide both positive and negative information.
• Avoid actions that would discredit the profession.
• Objectivity
• Communicate information fairly and objectively.
• Fully disclose all relevant information that could impact the user's understanding.