Chapter 5

MAS PRACTICE
STANDARDS AND
ETHICAL
CONSIDERATIONS
 LEARNING
OBJECTIVES
1. Understand the MAS practice
standards.
2. Know the rules in the Code of Ethics
applicable to the practice of
management consultancy services in the
Philippines.
3. Understand the Code of Ethics for
management consultants by other
international organizations such as
AICPA, IMA and AMCF.
4. Develop and apply techniques in
resolving ethical issues.
 MAS
PRACTICE
STANDARDS
 PERSONAL
CHARACTERISTICS

Standard No. 1. In performing Management

Advisory Services, a practitioner must act with
integrity and objectivity and be independent in
mental attitude.
The CPA, while performing Management
Advisory Services, practices in a unique professional
environment, evolving from his traditional role in the
attestation to the fairness of financial statements.
 PERSONAL
CHARACTERISTICS

Integrity is a highly personal characteristic which

ensures that practitioner's statement of findings and
recommendations are free of intentional distortions
or misstatements. Objectivity is the ability to avoid
bias and to maintain an impartial attitude on all
matters under review. A practitioner may undertake
only those engagements in which he can maintain an
independent mental attitude.
 PERSONAL
CHARACTERISTICS

The role which a practitioner assumes in a

management advisory service engagement is
fundamental to his maintaining integrity, objectivity
and an independent mental attitude. In all aspects of
the practitioner’s performance of MAS, he must
avoid assuming the role of management, limiting his
advices to those of an objective researcher, analyst, or
advisor rather than a decision maker.
 COMPETENCE

Standard No. 2. Engagements are to be

performed by a practitioner having competence in
the analytical approach and process and in the
technical subject matter under consideration.
In each technical area in which a practitioner
performs management advisory services, the services
performed are to be of professional quality.
 COMPETENCE

Competence in the professional work involves:

(a) the technical qualifications of the practitioners;
and
(b) the ability to supervise the personnel assigned, to
evaluate the quality of work performed and to accept
responsibility to the client for successful completion
of the engagement.
 COMPETENCE

Competence in performing management advisory

services is the ability to identify and define client
needs, to utilize the analytical approach and process,
to apply knowledge of the technical subject matter
under consideration, to communicate
recommendations effectively, and to assist in
implementing the recommendations. It is acquired
and maintained through a combination of education
and experience.
 COMPETENCE

Competence is acquired and maintained through

a combination of education and experience.
Education include formal and informal instruction
and self-study. Experience relates to the knowledge
and judgment acquired by personal participation in
management advisory services engagements and
other business affairs. Competence may be
augmented by research and by consultation with
others.
 DUE CARE

Standard No. 3. Due professional care is to be

exercised in the performance of Management
Advisory Services engagements.
The concept of due care is concerned with what
the practitioner does and how he does it. It involves
diligence and appropriate attention in carrying out
the assignment.
 DUE CARE

It does require systematic critical review by the

practitioner throughout the engagement of work
accomplished the judgment exercised. Due
professional care requires that all work be done
within the provisions of the Code of Professional
Ethics and other Professional Standards for CPAs.
 CLIENT BENEFIT

Standard No. 4. Before accepting an

engagement, a practitioner is to notify the client of
any reservations he has regarding anticipated
benefits.
Problem definition, identification of objectives
and benefits to be derived should be considered in
structuring the engagements.
 CLIENT BENEFIT

While in some cases the potential benefits are

obvious both to the client and to the practitioner, an
assessment of anticipated benefits often requires
sufficient exploratory work to establish their
reasonableness and also requires the exercise of
judgment. Some benefits can be quantified in
financial or statistical terms, but many other are less
tangible.
 CLIENT BENEFIT

The client’s willingness to accept

recommendations and his ability to implement them,
should be considered by the practitioner.
Unwillingness to accept or inability to implement
appropriate recommendations could impair
realization of potential benefits. If during the course
of the engagement the relationship between
anticipated benefits and costs changes significantly,
the client should be informed.
 UNDERSTANDING WITH
CLIENT

Standard No. 5. Before undertaking an

engagement, a practitioner is to inform his client of
all significant matters related to the engagement.
The significant matters related to an engagement
generally include (a) the Engagement's Objectives,
(b) its Scope, (c) the Approach, (d) the Role of all
Personnel, (e) the Manner in which Results are to be
Communicated, (f) the Timetable; and (g) the Fee.
 UNDERSTANDING WITH
CLIENT

Summary discussion or investigation is generally

necessary to develop client information for
formulating engagement objectives and identifying
data. The engagement objectives should reflect the
results expected to be derived. There should be a
clear expression by the practitioner as to both the
engagement objectives and the extent and nature of the
practitioner’s involvement.
 UNDERSTANDING WITH
CLIENT

Engagement scope should be broad enough to

encompass matters likely to be significant in
developing appropriate recommendations and
producing desired results. Particular attention should
be given to inform the client of possible consequences
of significant constraints.
PLANNING, SUPERVISION
AND CONTROL

Standard No. 6. Engagements are to be

adequately planned, supervised and controlled.
Planning, supervision and control are based
directly on the practitioner's understanding with the
client as to the engagement and as to the role of all
personnel concerned.
PLANNING, SUPERVISION
AND CONTROL

Planning
Planning is the translation of engagement
objectives into a structured set of activities and
events within a targeted time schedule. The resultant
engagement plan is to be used in supervising and
controlling the engagement.
PLANNING, SUPERVISION
AND CONTROL

Supervision
Engagement must be performed and supervised
by competent personnel. The practitioner in charge
must exercise judgment as to the appropriate amount
of supervision, based on the experience of the persons
involved and the complexity of the engagement.
PLANNING, SUPERVISION
AND CONTROL

Control 
Effective control requires measurement of
progress in meeting the engagement plan and
objectives. Adequate documentations should be
maintained to permit measurement and assessment
of progress at significant engagement points.
 SUFFICIENT RELEVANT
DATA
Standard No. 7. Sufficient relevant data is to be
obtained, documented and evaluated in developing
conclusions and recommendations.
A practitioner must exercise his professional
judgment in determining the type and amount of
data required. The source and reliability of the data
and any limitations with respect thereto; must be
considered in formulating conclusions.
 SUFFICIENT RELEVANT
DATA
The amount and formality of documentation will
vary according to the nature and scope of the
engagement. The documentation should demonstrate
that due care has been exercised. It should record , as
appropriate (a) the evidential matter obtained and its
source, (b) the alternatives considered and (c) the
analytical process leading to specific
recommendations.
 COMMUNICATION OF
RESULTS
Standard No. 8. All significant matters relating
to the result of the engagement are to be
communicated to the client.
The principal findings, recommendations and
accomplishments and the major assumptions relied
upon, should be conveyed to the client, together with
any limitations, reservations, or other qualifications.
 COMMUNICATION OF
RESULTS
Reports to the client may be written or oral.
When a practitioner does not issue a written report to
the client, he should prepare a file memorandum
documenting the significant recommendations and
other pertinent information discussed with the client.
 INTERIM
COMMUNICATIONS
Interim communications encourages the
involvement of management, helps preserve
management's role as decision maker and keeps
management informed of progress towards the final
conclusions, recommendations and accomplishments.
It should normally summarize (a) findings to
date, (b) work accomplished in relation to plan and
(c) when appropriate, tentative recommendations.
 FINAL REPORT

A final report should be made to the client upon

completion of an engagement to ensure that results
and recommendations are communicated. Reports
should be responsive to the objectives and scope of
the engagement. The nature of work performed and
the extent of interim communications will influence
the degree of detail of the final report.
 ETHICAL
CONSIDERATION
S
 CODE OF ETHICS FOR PROFESSIONAL
ACCOUNTANTS IN THE PHILIPPINES RELEVANT
TO MANAGEMENT CONSULTANCY SERVICES

Professional accountants as defined in the Code

of Ethics are "those persons who hold a valid
certificate issued by the Board of Accountancy,
whether they be in public practice, industry,
commerce, the public sector or education.
 SECTION 100.1

"A distinguishing mark of the accountancy

profession is its acceptance of the responsibility to act
in the public interest. Therefore, a professional
accountant's responsibility is not exclusively to satisfy
the needs of an individual client or employer. In
acting in the public interest a professional accountant
should observe and comply with the ethical
requirements of this Code."
 SECTION 100.4

This describes the Fundamental Principles that

every professional accountant, whether he/she be in
public practice, private industry, academe or
government services must observe.
A professional accountant is required to comply
with the following fundamental principles:
 INTEGRITY

The principle of integrity imposes an obligation

on all professional accountants to be straightforward
and honest in professional and business relationships.
A professional accountant should not be
associated with reports, returns,
communications or other information where they
believe that the information:
 INTEGRITY

(A) Contains a materially false or misleading

statement
(B) Contains statements or information furnished
recklessly
(C) Omits or obscure information required to be
included where such omission and obscurity would
be misleading.
 OBJECTIVITY

A professional accountant should not allow bias,

conflict of interest or undue influence of others to
override professional or business judgments.
The principle of objectivity imposes an obligation
to all professional accountants not to compromise
their professional or business judgment because of
bias, conflict of interest or undue influence of others
 PROFESSIONAL
COMPETENCE AND DUE
CARE
A professional accountant has a continuing duty
to maintain professional knowledge and skill at the
level required to ensure that a client or employer
receives competent professional service based on
current developments in practice, legislation and
techniques.
The principle of professional competence and due
care imposes the following obligations on professional
accountants:
 PROFESSIONAL
COMPETENCE AND DUE
CARE
1. To maintain professional knowledge and skill at
the level required to ensure that clients and
employees receive competent professional service.
2. To act diligently in accordance with applicable
technical and professional standard when providing
professional services.
 
 PROFESSIONAL
COMPETENCE AND DUE
CARE
Competent professional service requires the
exercise of sound judgment in applying professional
knowledge and skill in the performance of such
service.
Professional competence may be divided into two
separate phrases:
1. Attainment of professional competence
2. Maintenance of professional competence
 
 PROFESSIONAL
COMPETENCE AND DUE
CARE
The attainment of professional competence
requires initially a high standard of general
education followed by specific education, training
and examination in professionally relevant subjects
and whether prescribed or not, a period of work
experience.
 
 PROFESSIONAL
COMPETENCE AND DUE
CARE
The maintenance of professional competence
requires a continuing awareness and an
understanding of relevant technical professional and
business developments.
Diligence encompasses the responsibility to act in
accordance with the requirements of an assignment
carefully, thoroughly and on timely basis.
 
 PROFESSIONAL
COMPETENCE AND DUE
CARE
A professional accountant should take steps to
ensure that those working under the professional
accountant's authority in a professional capacity
have appropriate training and supervision.
 CONFIDENTIALITY

A professional accountant should respect the

confidentiality of information acquired as a result of
professional and business relationship and should not
disclose any such information to a third parties
without proper and specific authority unless there is
a legal or professional right or duty to disclose.
 CONFIDENTIALITY

Confidential information acquired as a result of

professional and business relationships should not be
used for the personal advantage of the professional
accountant or third parties.
The principle of confidentiality imposes an
obligation on professional accountants to refrain
from:
 CONFIDENTIALITY

(a) Disclosing outside the firm or employing

organization confidential information acquired as a
result of professional and business relationships
without proper and specific authority or unless there
is a legal or professional right or duty to disclose;
(b) Using confidential information acquired as a
result of professional and business relationships to
their personal advantage or the advantage of third
parties.
 CONFIDENTIALITY

A professional accountant should maintain

confidentiality even in a social environment. The
professional accountant should be alert to the
possibility of inadvertent disclosure, particularly in
circumstances involving long association with a business
associate or a close or immediate family member.
A professional accountant should also maintain
confidentiality of information disclosed by a prospective
client or employer.
 CONFIDENTIALITY

A professional accountant should also consider

the need to maintain confidentiality of information
within the firm or employing organization.
A professional accountant should take all
reasonable steps to ensure that staff under the
professional accountant's control and persons from
whom advice and assistance is obtained respect the
professional accountant's duty of confidentiality.
 CONFIDENTIALITY

The need to comply with the principle of

confidentiality continues even after the end of
relationships between a professional accountant and
a client or employer.
The following are circumstances where
professional accountants are or may be required to
disclose confidential information or where such
disclosure may be appropriate:
 CONFIDENTIALITY

(a) Disclosure is permitted by law and is authorized

by the client or the employer;
(b) Disclosure is required by law, for example:
(i) Production of documents or other provision
of evidence in the course of
legal proceedings; or
(ii) Disclosure to the appropriate public
authorities of infringements of the law that come
to light; and
 CONFIDENTIALITY

(c) There is a professional duty or right to disclose,

when not prohibited by law:
(i) To comply with the quality review of a
member body or professional body;
(ii) To respond to an inquiry or investigation by a
member body or regulatory body;
(iii) To protect the professional interests of a
professional accountant in legal proceedings; or
(iv) To comply with technical standards and
ethics requirements.
 PROFESSIONAL
BEHAVIOR
A professional accountant should comply with
relevant laws and regulations and should avoid any
action that discredits the profession.
The principle of professional behavior imposes an
obligation on professional accountants to comply
with relevant laws and regulations and avoid any
action that may bring discredit to the profession.
 ETHICAL
CONFLICT
RESOLUTIO
N
 In evaluating compliance with the
fundamental principles, a professional
accountant may be required to resolve a conflict
in the application of fundamental principles.
 
When initiating either a formal or informal
conflict resolution process, a professional
accountant should consider the following, either
individually or together with others, as part of
the resolution process:
- Relevant facts
- Ethical issues involved
- Fundamental principles related to
the matter in question
- Established internal procedures
- Alternative courses of action
 SOME
ETHICAL
ISSUES
 As a consultant achieves multidimensional
growth and the firm prospects, the nature of the
problems and challenges he faces evolves. At the
outset of his consulting career, he would be
typically concerned about cash flow, marketing,
and developing the expertise required to
complete more diverse assignments. In
midcareer during the firm's dramatic growth,
the issues become those of finding the right
alliance partners, developing long-term
relationships and establishing proper fee levels.
What is your stand on the following ethical
issues?

1. Should you change the highest fee you can

get away with?
2. Should you travel first class and bill the
client?
3. Should you bill more than one client for the
same basic expenses?
4. Should you accept an assignment from a
client’s competitor?
5. Should you use tickets supplied by your
client to bring your spouse along?
 CODE OF
ETHICS FOR
MANAGEMEN
T
CONSULTANTS
 CODE OF ETHICS FOR
MANAGEMENT
CONSULTANTS
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, to
promote the highest quality of performance in the
practice of management consultancy is presented below.
BASIC RESPONSIBILITIES OF
MANAGEMENT
CONSULTANTS
Integrity and objectivity
1. Do not knowingly misrepresent facts and never
subordinate judgment to others.
2. Place the interests of clients ahead of personal
interests and serve the client with integrity.
3. Inform the clients of any special relationships,
circumstances, or interests that might influence
judgment or impair objectivity.
BASIC RESPONSIBILITIES OF
MANAGEMENT
CONSULTANTS
Integrity and objectivity
4. Do not assume the role of management or take any
positions that might impair objectivity.
BASIC RESPONSIBILITIES OF
MANAGEMENT
CONSULTANTS
Independence
1. Take an independent position with the client,
making certain that advice to a client is based on
impartial consideration of all pertinent facts and
responsible opinions.
2. Do not serve an enterprise without independence
with respect to that enterprise.
BASIC RESPONSIBILITIES OF
MANAGEMENT
CONSULTANTS
Independence
3. Do not serve a client under terms or conditions
that might impair objectivity, independence or
integrity.
4. Do not serve two or more competing clients in
areas of vital interest without informing each client.
BASIC RESPONSIBILITIES OF
MANAGEMENT
CONSULTANTS
Confidential Information
1. Guard as confidential all information concerning
the affairs of a client that is gathered during the
course of a professional assignment.
2. Do not take advantage of material or inside
information resulting from a professional
relationship with a client.
BASIC RESPONSIBILITIES OF
MANAGEMENT
CONSULTANTS
Confidential Information
3. Do not disclose any confidential information
obtained in the course of a professional engagement
except with the client's consent.
PRACTICE STANDARDS FOR
MANAGEMENT
CONSULTANTS
Professional competence
1. Undertake only engagements that can be
completed with professional competence.
2. Accept only assignments for which the necessary
qualifications are possessed.
3. Present qualifications for serving a client solely in
terms of competence, experience and standing.
PRACTICE STANDARDS FOR
MANAGEMENT
CONSULTANTS
Planning, supervision and due care
1. Before accepting an assignment, confer with the
client or prospective client in sufficient detail and
gather sufficient facts to gain an adequate
understanding of the problem, the scope of study
needed to solve it, and the possible benefits that may
accrue to the client.
PRACTICE STANDARDS FOR
MANAGEMENT
CONSULTANTS
Planning, supervision and due care
2. Accept only assignments believed to be beneficial to
the clients, and do not accept any assignment of such
limited scope that the client cannot be served effectively.
3. Adequately plan and supervise an engagement
4. Assign personnel qualified by knowledge, experience
and character to give effective service in analyzing and
solving the particular problem or problems involved.
PRACTICE STANDARDS FOR
MANAGEMENT
CONSULTANTS
Planning, supervision and due care
5. Provide the client with a written proposal that
outlines the objectives, scope, approach and -where
possible, -the estimated fee or fee basis for the
proposed services, except where client relationships
make it unnecessary.
6. Exercise due professional care in the performance
of an engagement.
PRACTICE STANDARDS FOR
MANAGEMENT
CONSULTANTS
Planning, supervision and due care
7. If conditions change during the engagement,
discuss with client any changes in the objectives,
scope and approach or other aspects of the
engagement and obtain the client's agreement to such
changes before taking action on them.
PRACTICE STANDARDS FOR
MANAGEMENT
CONSULTANTS
Planning, supervision and due care
8. Obtain sufficient relevant data to afford a
reasonable basis for conclusions or recommendations
in relation to an engagement.
9. Do not knowingly without permission use
proprietary data, procedures, materials or techniques
that others have developed but not released for
public use.
PRACTICE STANDARDS FOR
MANAGEMENT
CONSULTANTS
Reporting results
1. Perform each assignment on an individual basis
and develop recommendations designed specifically
for the solution of each client's problems.
2. Develop solutions that are realistic and practical
and that can be implemented promptly and
economically.
PRACTICE STANDARDS FOR
MANAGEMENT
CONSULTANTS
Reporting results
3. Acquaint client personnel with the principles,
methods and techniques applied, so that the
improvement suggested or installed can be properly
managed and continued after completion of the
engagement.
4. Maintain continuity of understanding and knowledge
of client's problems and the work that has been done to
solve them, by maintaining appropriate files of reports
submitted to clients.
PRACTICE STANDARDS FOR
MANAGEMENT
CONSULTANTS
Reporting results
5. Do not guarantee any specific result, such as the
amount of cost reduction or profit increase.
6. Do not permit your name to be used in conjunction
with any forecast of future transactions in a manner
that could lead to the belief that you vouch for the
achievability of the forecast.
FEE STRUCTURE STANDARDS FOR
MANAGEMENT CONSULTANTS

1. Charge reasonable fees that are commensurate

with the nature of services performed and
responsibility assumed. Reasonableness is based on
services performed, time required, experience,
ability, reputation, responsibility assumed and
benefits that accrue to the clients.
FEE STRUCTURE STANDARDS FOR
MANAGEMENT CONSULTANTS

2. Do not offer or render professional services under

an arrangement whereby no fee will be charged
unless a specified finding or result is obtained or
whereby the fee is otherwise contingent on the
findings or results of the service.
 3. Where feasible, agree with the client in advance on
the fee or fee basis.
 
FEE STRUCTURE STANDARDS FOR
MANAGEMENT CONSULTANTS

 4. Do not pay a fee or commission to obtain a client

or franchise a business practice; do not accept a
commission, fee, or other valuable consideration for
recommending products or services.
5. Do not structure pricing or charging practices in a
way that impairs independence or objectivity or
contributes to a conflict of interest with the client.
BUSINESS-CONDUCT STANDARDS
FOR MANAGEMENT
CONSULTANTS
1. Strive continuously to advance and protect the
standards of the consulting profession.
2. Contribute to the development and understanding
of better ways to manage corporations, governmental
organizations and other institutions in our society.
3. Share methods and techniques used in serving
clients.
BUSINESS-CONDUCT STANDARDS
FOR MANAGEMENT
CONSULTANTS
4. Avoid not only professional improprieties but also
the appearance of improprieties and never commit an
act discreditable to the profession.
5. Do not advertise services in a manner that is false,
misleading, deceptive, self-laudatory or in any other
manner derogatory to the dignity of the profession.
BUSINESS-CONDUCT STANDARDS
FOR MANAGEMENT
CONSULTANTS
6. Do not concurrently engage in any business or
occupation that would create a conflict of interest in
rendering professional services.
7. Do not accept an assignment for a client while
another management consultant is serving that client
unless satisfied that any conflict between the two
engagements are recognized by and have the consent
of the client.
BUSINESS-CONDUCT STANDARDS
FOR MANAGEMENT
CONSULTANTS
8. Do not make offers of employment to consultants
on the staff of another consulting firm without first
informing the other firm.
9. Do not solicit employees of clients, for the purpose
of employing them, except with the client's consent.
10. Do not associate, in a responsible capacity
respecting client work, with any consultant who does
not adhere to the code of professional ethics.
THANK YOU FOR
LISTENING AND
GOD BLESS YOU
ALWAYS!
Jonah E. Caballes
Mara Shaira A. Siega