BALIUAG UNIVERSITY

CPA Review Program

Management Advisory Services
Luisito V. Correa Jr., CPA, CAT, MBA
__________________________________________________________________________________________
Module 1: Objectives, Role & Scope of Management Accounting L. V. CORREA
I. Management functions and concepts
✓ Definition
Management – A process consisting of planning, organizing, actuating and controlling, performed to determine
and accomplish the objectives by the use of people and resources. It efficiently and effectively coordinate the
work of others.
✓ Management functions
1. Planning – Involves defining goals, establishing strategies to achieve those goals, and developing plans to
integrate and coordinate activities. Strategic plan for long-term goals & operational plan for short-term
goals.
2. Organizing – The process of identifying and grouping the work to be performed, defining and delegating
responsibility and authority, and establishing relationships for the purpose of enabling people to work most
effectively together in accomplishing objectives.
3. Directing – Consists of process or technique by which instruction can be issued and operations can be
carried out as originally planned. It involves communication, leadership and motivation
4. Controlling – Involves establishing standards to measure performance, measuring actual performance,
comparing performance with the standard, and taking corrective action. Monitoring and feedback function.

II. Management accounting, cost accounting and financial accounting

Particular Management Accounting Cost Accounting Financial Accounting
Main Provide information to Objective is to record and Report the financial performance
Objective management to assist in planning, accumulate costs for financial and financial condition through
controlling, performance reporting and decision-making. issuance of financial statements
evaluation, and decision-making.
User Internal Internal and external Internal and external
Basis Need not adhere with standards GAAP for cost accounting IFRS GAAP or IFRS (full)
(selected)
Focus Present condition and forecast of Historical/ past-oriented Historical/ past-oriented
future
Data needed Uses data in cost and financial Cost-related data Financial data
accounting
Scope Business segment Cost departments Organization as a whole
Format Format is informal and is on a per Standard format and based on Format per standards or
department/company basis company needs. regulatory requirement.
Reporting As needed Periodic (annual, quarter, Periodic (annual, quarter,
monthly) monthly)
Independent Not required Required as part of financial Required
Audit reporting

III. Controller and Treasurer

Controllership and treasurership are both functions of financial management. The controller is considered the
head accountant for the company primarily responsible for financial reporting. Treasurer, on the other hand, is
the financial adviser primarily responsible for financing and investment. Both the controller and treasurer
reports to the Chief financial Officer (CFO).

✓ Roles and activities of controller and treasurer:

Controllership Treasurership
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 Module 1: Objectives, Role & Scope of Management Accounting L. V. CORREA
▪ Planning for control ▪ Provision of capital
▪ Financial reporting and interpreting ▪ Investor relation
▪ Evaluating and consulting ▪ Short-term financing
▪ Tax administration ▪ Banking and cash custody
▪ Government reporting ▪ Credits and collections
▪ Internal audit & asset protection ▪ Investments
▪ Economic appraisal ▪ Insurance

IV. International certification in management accounting

✓ Definition of management accounting
• Institute of Management Accountants (IMA)
Management accounting – 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.
• Chartered Institute of Management Accountants (CIMA)
Management Accounting – the process of identification, measurement, accumulation, analysis,
preparation, interpretation and communication of information used by management to plan, evaluate and
control within an entity and to assure appropriate use of and accountability for its resources.
✓ Role of management accountant per Institute of Certified Management Accountants (CMA)
Management accountant – applies his or her professional knowledge and skill in the preparation and
presentation of financial and other decision oriented information in such a way as to assist management in
the formulation of policies and in the planning and control of the operation of the undertaking.

✓ Three areas of management accounting per American Institute of Certified Public Accountants (AICPA)
a. Strategic Management – advancing the role of the management accountant as a strategic partner in the
organization.
b. Performance Management – developing the practice of business decision-making and managing the
performance of the organization.
c. Risk Management – contributing to frameworks and practices for identifying, measuring, managing and
reporting risks to the achievement of the objectives of the organization
✓ Global Management Accounting Principles per Chartered Global Management Accountant (CGMA)
a. Communication provides insight that is influential
b. Information is relevant
c. Impact on value is analyzed
d. Stewardship builds trust
✓ Four standards for ethical conduct for management accountant per IMA
a. Competence
b. Confidentiality
c. Integrity
d. Credibility

❖ Multiple Choice Questions

1. This consists of identifying alternatives, selecting from among the alternatives the one that is best for the
organization and specifying what actions will be taken to implement the chosen alternative.
A. Planning C. Directing
B. Organizing D. Controlling

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Module 1: Objectives, Role & Scope of Management Accounting L. V. CORREA
2. The delegation of decision making authority throughout the organization by providing managers at various
operating levels with the authority to make key decisions relating to their area of responsibility.
A. Assignment C. Directing
B. Organizing D. Decentralization
3. Which of the following management practices involves concentrating on areas that deserve attention and
placing less attention on areas operating as expected?
A. Management-by-objectives C. Benchmarking
B. Responsibility accounting D. Management-by-exception
4. Accounting and other reports that help managers monitor performance and focus on problems and
opportunities that might otherwise go unnoticed.
A. Budget C. Performance report
B. Feedback D. Planning report
5. A detailed report to management comparing budgeted data to actual data for a specific time period.
A. Budget C. Performance report
B. Feedback D. Planning report
6. The process by which managers, given their assigned level of responsibilities, run day-to-day operaions.
A. Organizing C. Motivating
B. Directing D. Leadership
7. The key difference between strategic goals and tactical goals is that tactical goals are
A. Short-term in nature C. Usually attainable
B. Developed by top management D. Concerned with issues other than profit
8. A visual diagram of a firm’s organizational structure that depicts formal lines of reporting, communication,
and responsibility between managers.
A. Organizational chart C. Chart of accounts
B. Cycle diagram D. Responsibility accounting
9. A phase of accounting concerned with providing information to managers for use in planning and controlling
operations and in decision making.
A. Financial accounting C. Management accounting
B. Cost accounting D. Responsibility accounting
10. Which of the following characteristics does not relate to management accounting?
A. Reports may include non-monetary information.
B. It is subject to restrictions imposed by GAAP/IFRS.
C. Reports are often based on estimates and are seldom useful for anything other than its purpose.
D. It provides data for internal users within the organization.
11. Which of the following is not a function of management accounting?
A. Partnering in management decision making.
B. Providing expertise in financial reporting and control.
C. Assisting the management in the formulation and implementation of an organization's strategy.
D. None of the foregoing.
12. Managerial accounting differs from financial accounting in that financial accounting is
A. More oriented toward the future.
B. Primarily concerned with external financial reporting.
C. Concerned with nonquantitative information.
D. Heavily involved with decision analysis and implementation of decisions.
13. Management should implement a different and/or more expensive accounting system only when
A. The cost of the system exceeds the benefits C. . The board of directors dictates a change
B. Management thinks it appropriate. D. The benefits of the system exceed the cost
14. Cost and managerial accounting systems are goods in the economic sense and, as such, their benefits must
exceed their costs. When managerial accounting systems change, the cost that is frequently ignored is
A. Educating users C. Training accounting staff
B. Gathering and analyzing data D. Preparing reports
15. Management accounting is used by an organization's management for a multitude of purposes that do not
include

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Module 1: Objectives, Role & Scope of Management Accounting L. V. CORREA
A. Marketing C. Evaluation
B. Control D. Reporting
16. The following characteristics relate to financial accounting, except
A. Provides information to external users C. Has no externally imposed standards
B. Emphasizes objective data D. Generates general purpose reports
17. Management accounting differs from financial accounting in that financial accounting is
A. More oriented toward the future C. Concerned with non-quantitative information
B. Concerned with external reporting D. Heavily involved with decision analysis
18. The responsibility for safeguarding financial assets and arranging financing is given to the
A. Controller C. Comptroller
B. Chief financial officer D. Treasurer
19. Controllers are not ordinarily concerned with
A. Preparation of tax returns C. Protection of asset
B. Reporting to government D. Investor relation
20. Treasury function is usually not concerned with
A. Financial reporting C. Cash custody
B. Short-term financing D. Credit extension and collection of bad debts
21. Areas of management accounting least likely includes
A. Risk management C. Marketing management
B. Performance management D. Strategic management
22. The IMA Code of Ethics includes a competence standard, which requires the financial manager/ management
accountant to
A. Report information, whether favorable or unfavorable.
B. Develop his/her professional proficiency on a continual basis.
C. Discuss ethical conflicts and possible courses of action with an unbiased counselor.
D. Discuss, with subordinates, their responsibilities regarding the disclosure of information on the firm.
23. Integrity is an ethical requirement for management accountant. One aspect of integrity requires
A. Avoidance of conflict of interest. C. Refraining from improper use of inside information.
B. Performance of professional duties. D. Maintenance of appropriate level of competence.
24. A management accountant discovered that her company is violating environmental laws. If her immediate
supervisor is involved, her appropriate action is to
A. Do nothing for her duty of loyalty. C. Confront her immediate supervisor.
B. Consult audit committee. D. Present matter to next higher managerial level.
25. If a financial manager/management accountant discovers unethical conduct in his/her organization and
fails to act, (s)he will be in violation of which ethical standard(s)?
A. "Actively or passively subvert the attainment of the organization's legitimate and ethical objectives."
B. "Communicate unfavorable as well as favorable information."
C. "Condone the commission of such acts by others within their organizations."
D. All of the answers are correct.
26. Under the express terms of the IMA Code of Ethics, a financial manager/management accountant may not
A. Advertise.
B. Encroach on the practice of another financial manager/management accountant.
C. Disclose confidential information unless authorized or legally obligated.
D. Accept other employment while serving as a financial manager/management accountant.
27. Which ethical standard is most clearly violated if a financial manager/management accountant knows of a
problem that could mislead users but does nothing about it?
A. Competence C. Objectivity
B. Legality D. Confidentiality
28. The IMA Code of Ethics includes an integrity standard, which requires the financial manager/ management
accountant to
A. Identify and make known anything that may hinder his/her judgment or prevent satisfactory
completion of any duties.
B. Report any relevant information that could influence users of financial statements.
C. Disclose confidential information when authorized by his/her firm or required under the law.
D. Refuse gifts from anyone.
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Module 1: Objectives, Role & Scope of Management Accounting L. V. CORREA
29. The IMA Code of Ethics includes a competence standard, which requires the financial manager/
management accountant to
A. Report information, whether favorable or unfavorable.
B. Develop his/her professional proficiency on a continual basis.
C. Discuss ethical conflicts and possible courses of action with an unbiased counselor.
D. Discuss, with subordinates, their responsibilities regarding the disclosure of information about the
firm.
30. According to the Standards of Ethical Conduct for Practitioners of Management Accounting and Financial
Management, a practitioner has a responsibility to recognize professional limitations. Under which
standard of ethical conduct would this responsibility be included?
A. Competency C. Integrity
B. Confidentiality D. Objectivity
31. At Key Enterprises, the controller is responsible for directing the budgeting process. In this role, the
controller
has significant influence with executive management as individual department budgets are modified and
approved. For the current year, the controller was instrumental in the approval of a particular line
manager's budget without modification, even though significant reductions were made to the budgets
submitted by other line managers. As a token of appreciation, the line manager in question has given the
controller a gift certificate for a popular local restaurant. In considering whether or not to accept the
certificate, the controller should refer to which section of the Standards of Ethical Conduct for Practitioners
of Management Accounting and Financial Management?
A. Competency C. Integrity
B. Confidentiality D. Objectivity
32. In accordance with the Standards of Ethical Conduct for Practitioners of Management Accounting and
Financial Management, a management accountant who fails to perform professional duties in accordance
with relevant standards is acting contrary to which one of the following standards?
A. Competency C. Integrity
B. Confidentiality D. Objectivity

“Do the difficult things while they are easy and do the great things while they are small. A journey of a thousand
miles must begin with a single step.” Lao Tzu

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