MAS PRACTICE

STANDARDS AND
ETHICAL CONSIDERATIONS
Chapter 5
MAS Practice Standards
01 Personal Characteristics
In performing Management Advisory Services, a
practitioner must act with integrity and objectivity and be
independent in mental attitude.

02 Competence
Engagements are to be performed by a practitioner
having competence in the analytical approach and
process, and in the technical subject matter under
consideration.
03 Due Care
Due professional care is to be exercised in the
performance of Management Advisory Services
engagement.

04 Client Benefit
Before accepting an engagement, a practitioner is to
notify the client of any reservations he has regarding
anticipated benefits.
05 Understanding With Client
Before taking an engagement, a practitioner is to
notify the client of all significant matters related to
the engagement.
Engagement Role of all
Scope Approach
Objectives personnel

The timetable The manner in The fee

which results
are to be
communicated
06 Planning, Supervision and Control
Engagement are to be adequately planned,
supervised, and controlled.

07 Sufficient Relevant Data

Sufficient relevant data it is to be obtained,
documented, and evaluated in developing conclusions
and recommendations.

08 Communication of Results
All significant matter relating to the result of the
engagement are to be communicated to the client.
Interim Communications Final Report

During the engagement After the engagement

Ongoing updates Deliver final results

Less formal Formal

 Code of Ethics for Professional Accountants in the
Philippines Relevant to Management Consultancy Services

100.1 A distinguishing mark of the accountancy profession is

its acceptance of the responsibility to act in the public interest.
Therefore, a Member’s responsibility is not exclusively to
satisfy the needs of an individual Client or employer. In acting
in the public interest, a Member should observe and comply
with the ethical requirements of this Code.
 Fundamental Principles
1 Integrity

2 Objectivity

3 Professional competence and due care

4 Confidentiality

5 Professional Behavior
 Ethical Conflict Resolution
Ethical Conflict
A situation where a person has to choose between
opposing values or moral principles
A professional accountant should consider the following:

Established
Ethical issues
internal
involved
procedures

Fundamental
principles related Alternative
Relevant facts
to the matter in courses of action
question
 What to do:

If the matter If a significant

remains conflict cannot be
unresolved? resolved?

Where a matter If after exhausting all

involves a conflict relevant possibilities,
with or w/o in an the ethical conflict
organization? remains unresolved?
Some Ethical Issues
Once the firm becomes
a going concern, some
ethical challenges become
the unique issues related to
its success
 How would you for instance, respond to these challenges?

1. If a consultant is in demand, should he simply charge the highest possible &

not even worry about perceived value?

To do: If one is charging on a fee basis & the client is aware of & accepts the fee,
the client obviously has determined that the value is worth the investment.
The following should also be observed:
a. If the consultant is justifying the high investment through extravagant
promises & providing only marginal delivery, he is not building long-term
potential.
b. If the consultant is charging a per diem or a fee based on some other fixed
standard, there is never an excuse for anything other than actual hours
performed, on-site or off-site.
 How would you for instance, respond to these challenges?

2. A consultant says that he travels first class, stays on the concierge floor of the
best hotels & prefers limousines over taxis. He believes that he is worth it & as
long as he is honest about it, the client should be billed for his normal travel
preferences.

To do: If the client approves of a luxurious travel style, there is no problem.

However, the consultant's primary goal is improve the client's condition.
a. If the client does not offer it, don't abuse it.
b. If one wants to travel first class, use limos & best hotels, he should shoulder
the luxury travel difference out of his personal pocket.
c. Even if the consultant is willing to personally pay the difference, refrain from
being too visible, travel modestly.
 How would you for instance, respond to these challenges?

3. A consultant is seeing three clients on a certain trip. He bills each of them for
100% since he has to visit each one anyway.
To do: Never double-bill. Send a cover letter w/ the Statement of Expenses.

4. A competitor of one of the consultant's largest clients wants to hire the

consultant because his reputation has been associated w/ his client's success.
To do: a. Make it a condition that the consultant will not be asked to do anything
that will reveal confidential information; directly or indirectly.
b. Try to assign different personnel to each project.
c. Inform the present client of the competitor's request.
d. Consultant should not divulge anything learned to the current client.
 How would you for instance, respond to these challenges?

5. A client offers the consultant first-class airfare to visit its European offices.
The consultant takes his entire family because he considers it his personal
business.

To do: Either tell the client what one intends to do or he should not do it. If the
consultant is uncomfortable telling the client about it, the chances are strong
that what he is doing is unacceptable.
Some guidelines in determining whether he is doing the
right thing or not:
Does the activity improve the
client's condition or merely his
own?

Is the activity something that one Is there harm being done to

will be comfortable explaining to anyone without their being able to
the client? respond?

Is the activity something that the Is this treatment something the

consultant could be proud of & consultant would willingly subject
would publicize as a trait? himself to?

“Do the right thing. You can't do much better than consistenly try to do the right thing.”
 Code of Ethics for
Management Consultant
Code of Conduct for
management consultants
represents the attitude,
principles and approaches
that have been found to
contribute most to success
and make for equitable and
satisfactory client
relationship
 A summary of the Code of Ethics developed by the AICPA, Institute of
Management Consultants and Association of Management Consulting Firms

This Code of Ethics can be broadly classified into four areas:

1 Basic responsibilities 2 Practice standards

▪︎ Integrity and ▪︎ Professional
Objectivity Competence
▪︎ Independence ▪︎ Planning,
▪︎ Confidential Supervision, and Due
Information care
▪︎ Reporting Results

3 Fee arrangements 4 Business conduct

ORGANIZATION AND
MANAGEMENT OF
MAS PRACTICE
Chapter 6
 Developing MAS Practice

Areas of Specialization:
Financial Areas
Business
Management
Marketing
Industrial
Management
Engineering
Prior to entering into a consulting practice, the prospective consultant should
conduct market research to identify opportunities in the marketplace:

01 02
Study of the listings Survey of local CPA
of management firms to determine
consultants which are offering
consulting services

03 04
Determination of Identification of
possible oversaturation new services that
of consultants in one's may provide a
specialty area. competitive edge.
 Goals and objectives of consultants in rendering
and delivering its services:

a desired income strategies to

level obtain those
clients
potential clients
Should such deficiencies exist, a consulting firm can apply these approaches:

It can undertake a
It can employ variety of "staff
additional development" activities
consultant with that are intended to
adequate knowledge endow the presently
and skills employed consultant
with needed knowledge
and skills.
 Staff Pyramid and Fee Structures
Level
1
1 Partners, Principals, Directors

2 1-3 Senior Managers, Managers, Supervisors

3 1-5 Senior Consultants, Seniors

4 2-6 Associate Consultant, Staff

 Staff Pyramid and Fee Structures

Partners, Senior
Principals, Consultants,
Directors Senior Managers, Seniors
Associate
Managers,
Consultant, Staff
Supervisors
 Staff Pyramid and Fee Structures

Partners, Principals, Directors

-This individual is typically the most experienced highly paid professional

-Normally responsible for the successful completion of engagements, dealing
directly with clients and for selling work.

Principal activities of partners include:

•performing practice planning
•administering and developing practice
• consulting with top-client managers
• approving engagement reports
•managing client crises
 Staff Pyramid and Fee Structures

Senior Managers, Managers, Supervisors

-These individuals perform week-to-week management of the engagements

-Responsible for identifying new client prospects
-Assisting in the sales process

Principal activities of managers include:

•planning engagements
•evaluating consultants
•supervising consultants
• writing proposals
• reviewing working papers and reports
•consulting with client managers
 Staff Pyramid and Fee Structures

Senior Consultants, Seniors Associate Consultant, Staff

-These individuals typically have 2 or 3 - "young or new staff"

years of consulting experience and are
capable of supervising the daily work -Depending upon the firm, these
of the younger staff. individuals usually have less than 2
years of consulting experience and
-They possess the right combination of may have been hired directly out of
experience and dedication to complete graduate or undergraduate school.
different projects with limited
upervision.
 Billing Rates
The typical range of billing rates of the four pyramid levels are as follows:

Level 1 6,000 to 12,000 per hour

Level 2 3,600 to 6,000 per hour

Level 3 2,000 to 3,600 per hour

Level 4 1,200 to 2,000 per hour

 Defining the Target Level of Competence
of Management Consultants

Consulting competence
The ability of a consultant (e.g. management services practitioner
with an accounting background) to deliver specific agreed-upon
consulting services to a client on a profitable time-and-fee basis
observing professional standards.
 Four major factors that must be considered when
defining the target level of competence:

Scope of Practice Area Service Variety

Service Delivery Capability Client Requirements

 Management of MAS Practice

Steps in Starting the MAS Practice:

Determine and Prepare MAS personnel
list services lineup
(-Accounting firm's own staff. -
Experienced specialists (engineers,
consultants). -Referral by other CPAs.)

Review client list Seek out advisory

and prepare a engagements
package
 Sources of MAS Engagemet
Primary
Audit clients
Sources

Referrals from CPAs

Referrals from audit clients
Referrals from businessmen
Other Sourcers
Referrals from financial and government
institutions
Referrals from legal and professional firms
 Problem Areas in Rendering MAS by
an Independent Accounting Firm
Questions as to the effect of the practice of MAS on the firm's
1
independence.
Development and maintenance of a high level of competence
2
in MAS.

3 Questions of what fee to charge.

Question of AUDIT-MAS cooperation in obtaining

4
engagements.
Question of regular communication between
5
the MAS function and the rest of the firm.
Financial Management of an MAS Practice
A consulting practice is a business and requires
financing.
Financing can come from:
Personal investments
Contributions from consultants
Bank loans

1 Working Capital
Used for monthly operating expenses

2 Office Facilities & Equipment Requirements

A professional image is essential
Revenues & Expenses of Management Consultants:

Revenue
Service fees charged to clients.

Billings and Collection Billing methods:

Hourly
Daily
Per diem basis
 Preparing a Business Plan for MAS Practice

Why Prepare a Plan? What is a Business Plan?

Most consultants focus on being A business plan is a written

consultants first, business owners summary of what the consultant
second. Planning and management hopes to achieve. It helps in
skills are essential for success. organizing resources to meet goals.
Without a plan, there is a high risk of It provides a structured approach to
failure. decision-making.
 Business Plan Format
The plan consists of four parts:

Introduction- Financial Plan

Highlights the 2 (Outlines the 4
business plan. current level of
financing.)

Business Appendix
1 Concept 3 (Contains
(Outlines the additional
action plan for supporting
the coming documents.)
year.)