Accounting 142

MANAGEMENT ADVISORY SERVICES CONCEPTS, STANDARDS AND PRACTICES

MANAGEMENT ACCOUNTING CONCEPTS
MULTIPLE CHOICES. Read carefully the questions below and choose the best statement among the choices. Write only the letter in CAPITAL
FORM on the answer sheet provided along with this questionnaire. Erasures or any kinds of alterations will not be given points. God bless.
b. treasurer.
1. Which of the following functions is best described as choosing c. vice-president of accounting.
among available alternatives? d. internal auditor.
a. Planning. e. chief financial officer (CFO).
b. Directing operational activities.
c. Decision making. 11. A controller is normally involved with:
d. Controlling. a. preparing financial statements.
e. Budgeting. b. managing investments.
c. raising capital.
2. Which of the following involves the coordination of daily business d. safeguarding assets.
functions within an organization? e. managing the firm's credit policy.
a. Decision making.
b. Planning. 12. Which of the following is not a function of the treasurer?
c. Directing operational activities. a. Safeguarding assets.
d. Controlling. b. Managing investments.
e. Motivating. c. Preparing financial statements.
d. Being responsible for an entity's credit policy.
3. Which of the following is not an objective of managerial e. Raising capital.
accounting?
a. Providing information for decision making and planning. 13. Managerial accountants:
b. Assisting in directing and controlling operations. a. often work on cross-functional teams.
c. Maximizing profits and minimizing costs. b. are located throughout an organization.
d. Measuring the performance of managers and subunits. c. are found throughout an organization and work on cross-functional
e. Motivating managers toward the organization's goals. teams.
d. are found primarily at lower levels of the organizational hierarchy.
4. Managerial accounting: e. are found primarily at higher levels of the organizational hierarchy.
a. focuses only on historical data.
b. is governed by GAAP. 14. Much of managerial accounting information is based on:
c. focuses primarily on the needs of personnel within the organization. a. a cost-benefit theme.
d. provides information for parties external to the organization. b. profit maximization.
e. focuses on financial statements and other financial reports. c. cost minimization.
d. the generation of external information.
5. Managerial accounting: e. effectiveness but not efficiency.
a. is unregulated.
b. produces information that is useful only for manufacturing 15. Which of the following is not an element of competence?
organizations. a. To develop appropriate knowledge about a particular subject.
c. is based exclusively on historical data. b. To perform duties in accordance with relevant laws.
d. is regulated by the Securities and Exchange Commission (SEC). c. To perform duties in accordance with relevant technical standards.
e. generally focuses on reporting information about the enterprise in d. To refrain from engaging in an activity that would discredit the
its entirety rather than by subunits. accounting profession.
e. To prepare clear reports after an analysis of relevant and reliable
6. Which of the following would likely be considered an internal user information.
of accounting information rather than an external user?
a. Stockholders. 16. Assume that a managerial accountant regularly communicates with
b. Consumer groups. business associates to avoid conflicts of interest and advises
c. Lenders. relevant parties of potential conflicts. In so doing, the accountant
d. Middle-level managers. will have applied the ethical standard of:
e. Government agencies. a. objectivity.
b. confidentiality.
7. Financial accounting focuses primarily on reporting: c. integrity.
a. to parties outside of an organization. d. credibility.
b. to parties within an organization. e. unified behavior.
c. to an organization's board of directors. 17.Managerial accounting information
d. to financial institutions. a. pertains to the entity as a whole and is highly aggregated.
e. for financial institutions. b. pertains to subunits of the entity and may be very detailed.
c. is prepared only once a year.
8. Which of the following statements represents a similarity between d. is constrained by the requirements of generally accepted accounting
financial and managerial accounting? principles.
a. Both are useful in providing information for external users.
b. Both are governed by GAAP. 18.The major reporting standard for presenting managerial accounting
c. Both draw upon data from an organization's accounting system. information is
d. Both rely heavily on published financial statements. a. relevance.
e. Both are solely concerned with historical transactions. b. generally accepted accounting principles.
c. the cost principle.
d. the current tax law.

9. Which of the following employees would be considered as holding 19.Which of the following is not an internal user?
a line position? a. Creditor
a. The controller of Exxon Corporation. b. Department manager
b. The vice-president for government relations of Microsoft. c. Controller
c. The manager of food and beverage services at Disney's Magic d. Treasurer
Kingdom.
d. A secretary employed by Hewlett-Packard. 20.Managerial accounting does not encompass
e. None of the above. a. calculating product cost.
b. calculating earnings per share.
10. The chief managerial and financial accountant of an organization is c. determining cost behavior.
the: d. profit planning.
a. chief executive officer (CEO).
21.Managerial accounting is applicable to c. Gathering data from sources other than the accounting system.
a. service entities. d. Deciding the best level of inventory to be maintained.
b. manufacturing entities.
c. not-for-profit entities. 34. Planning and control are
d. all of these. a. different names for the same thing.
b. the basic functions of management.
22.Management accountants would not c. described equally well by the terms "decision making" and
a. assist in budget planning. "performance evaluation."
b. prepare reports primarily for external users. d. exemplified by, respectively, financial statements and budgeting.
c. determine cost behavior.
d. be concerned with the impact of cost and volume on profits. 35. Which of the following types of information are used in
management accounting?
23.Internal reports must be communicated a. financial information
a. daily. b. nonfinancial information
b. monthly. c. information focused on the long term
c. annually. d. All of the above are correct.
d. as needed.
36. Management accounting:
24.Which of the following statements about internal reports is not true? a. focuses on estimating future revenues, costs, and other measures to
a. The content of internal reports may extend beyond the double-entry forecast activities and their results
accounting system. b. provides information about the company as a whole
b. Internal reports may show all amounts at market values. c. reports information that has occurred in the past that is verifiable
c. Internal reports may discuss prospective events. and reliable
d. Most internal reports are summarized rather than detailed. d. provides information that is generally available only on a quarterly
or annual basis
25.In an analogous sense, external user is to internal user as generally
accepted accounting principles are to 37. Which of the following descriptors refer to management accounting
a. timely. information?
b. special-purpose. a. It is verifiable and reliable.
c. relevance to decision. b. It is driven by rules.
d. SEC. c. It is prepared for shareholders.
d. It provides reasonable and timely estimates.
26.Planning is a function that involves
a. hiring the right people for a particular job.
b. coordinating the accounting information system. 38. Management accounting information includes:
c. setting goals and objectives for an entity. a. tabulated results of customer satisfaction surveys
d. analyzing financial statements. b. the cost of producing a product
c. the percentage of units produced that is defective
27.The managerial function of controlling d. All of the above are correct.
a. is performed only by the controller of a company.
b. is only applicable when the company sustains a loss. 39. The person most likely to use management accounting information
c. is concerned mainly with operating a manufacturing segment. is a(n):
d. includes performance evaluation by management. a. banker evaluating a credit application
b. shareholder evaluating a stock investment
c. governmental taxing authority
28.A manager that is establishing objectives is performing which d. assembly department supervisor
management function?
a. Motivating 40. The person most likely to use only financial accounting information
b. Directing is a:
c. Planning a. factory shift supervisor
d. Constraining b. vice president of operations
c. current shareholder
29. The controller of a company or other organization is d. department manager
a. a staff manager.
b. an operating manager. 41. Which of the following groups would be least likely to receive
c. an accountant, not a manager. detailed management accounting reports?
d. a natural manager. a. stockholders
b. customer service representatives
30. Which statement about the degree of detail in a report is true? c. production supervisor
a. It depends on the level of the manager receiving the report. d. vice president of operations
b. It may depend on the frequency of the report.
c. It depends on the type of manager receiving the report. 42. Top executives of a multi-plant firm are least likely to use
d. All of the above. management accounting information:
a. to support decisions that result in long-term consequences
31. Managerial accounting is similar to financial accounting in that b. to evaluate the performance of individual plants
a. both are governed by generally accepted accounting principles. c. for strategic planning
b. both deal with economic events. d. for operational control
c. both concentrate on historical costs.
d. both classify reported information in the same way. 43. Managers of service departments need all of the following
information except:
32. One of the ways managerial accounting differs from financial a. efficiency data on work performance
accounting is that managerial accounting b. quality data on work performance
a. is bound by generally accepted accounting principles. c. profitability data of the whole company
b. classifies information in different ways. d. profitability data of the service department
c. does not use financial statements.
d. deals only with economic events. 44. A national company manufactures a line of modern furniture.
Information most useful to the employee who assembles the
33. Which activity is not normally performed by managerial furniture includes:
accountants? a. a daily report comparing the actual time it took to assemble a piece
a. Assisting managers to interpret data in managerial accounting of furniture to the standard time allowed
reports. b. a monthly report on the portion of furniture pieces assembled with
b. Designing systems to provide information for internal and external defects
reports. c. the number of furniture pieces sold this month
d. revenue per employee 55. Which of the following types of management services is normally
related to accounting and finance?
45. Which of the following would be least helpful for a top manager of a. Management audit.
a company? b. Marketing forecasts.
a. profitability report of the company c. Costs determination of alternatives in collective bargaining
b. information to monitor hourly and daily operations agreements.
c. number of customer complaints d. Job evaluation and salary administration.
d. operating expense summary reported by department
56. Which of the following types of management services is not directly
46. Management accounting can play a critical role in the service related to accounting and finance functions?
industry because of all the following reasons except: a. Cost analysis of major investment decision.
a. firms must be especially sensitive to the timeliness and quality of b. Design, installation and review of budgetary system.
customer service c. Valuation of capital stock of companies for purposes of merger or
b. many employees have very little contact with customers sales.
c. customers immediately notice defects and a delay in service d. Long range planning.
d. dissatisfied customers may never return
57. A certified public accountant’s scope of management services is
47. Which of the following is a Controller’s responsibility? broad and covers all of the following except
a. Tax planning and accounting a. Change management engagements.
b. In charge of credit and collection b. Audit engagements.
c. Custodian of funds c. Computerization engagements.
d. Arranging short-term financing d. Re-engineering jobs.

58. Which of the following is not classifiable as a management advisory

48. Which of the following is not a controllership function, as service by CPAs?
distinguished from a treasury function? a. Annual financial planning and budgeting.
a. Reporting and interpreting b. Information systems.
b. Protection of assets c. Public relations work.
c. Credit and collection d. Lease-or-buy analysis.
d. Government reporting
59. Management services of certified public accountant cover all of the
49. The primary purpose of management advisory services is following except
a. To conduct special studies, preparation of recommendation, a. Project feasibility studies.
development plans and programs, and provision of advice and b. Organizational development and planning.
assistance in their implementation. c. Systems design, development and implementation.
b. To provide service or to fulfill some social need. d. Audit, tax and legal services.
c. To improve the client’s use of its capabilities & resources to achieve
the objectives of the organization. 60. Which of the following is not an area related to the performance of
d. To earn the best rate of return on resources entrusted to its care with management services by independent accounting firms?
safety of investment being taken into account and consistent with a. Introducing new ideas, concepts and methods to management.
the firm’s social and legal responsibilities. b. Improving existing policies, methods and procedures
c. Performing special studies, preparing recommendations, and
50. Which of the following statements is not true? formulating plans and programs
a. In the rendition of MAS, independence must be observed so as to d. Performing management functions and making decisions
maintain the essential requisites of impartiality and objectivity.
b. All provisions of the code of professional ethics are applicable to 61. A management advisory services engagement involves the
the practice of MAS except those rules related to the expression of following activities in what order?
an opinion on financial statements. I. Post-engagement follow-up.
c. MAS serves only in the areas of accounting and finance. II. Implementing the recommendation.
d. Before accepting an engagement, a practitioner should notify the III. Conducting the engagement.
client of any reservations he has regarding anticipated benefits. IV. Negotiating the engagement.
V. Preparing for and starting the engagement.
51. Which of the following acts is not performed by an independent VI. Evaluating the engagement.
CPA engaged to install an accounting system? VII. Preparing and presenting report and recommendations.
a. Formulation of the chart of accounts
b. Design of business and accounting forms a. VII, VI, V, IV, III, II and I.
c. Supervision of application of system and procedures recommended b. IV, V, III, VII, II, VI, and I.
d. Preparation of an accounting manual. c. IV, III, V, VI, II, VII, and I.
d. III, IV, V, VI, VII, I and II.
52. The following characterize management advisory services except
a. Involve decision for the future. 62. The following statements refer to competence of CPA’s in
b. Broader in scope and varied in nature. management advisory services except
c. Utilize more junior staff than senior members of the firm. a. In concept it refers to the technical qualification of the practitioner
d. Relate to specific problems where expert help is required. and his ability to supervise and evaluate the quality of work of his
staff assigned to the engagement so as to be responsible for the
53. Which of the following is not a characteristic of management successful completion of the project.
services? b. It is acquired by education, self study, attendance to professional
a. MAS engagements are recurring. development courses, actual experience in MS work and research.
b. A wider variety of assignments are encountered in MAS than in c. It is the ability to identify client’s needs, use analytical approach
audit. and process, apply technical knowledge, communicate
c. MAS pinpoint actions to be taken, the benefits of which will be recommendations and assist in implementation.
received in the future. d. It must be retained in the rendition of MAS work and it can be
d. In MAS engagements, the nature of work involved requires a lesser impaired if the CPA performs decision-making for the client or acts
need for junior assistance. as employee of the client.

54. Which of the following is not a characteristic of Management 63. Which of the following statements is true?
Advisory Services? a. A CPA with MBA and PhD degrees is automatically qualified to
a. MAS is broad in scope render management services.
b. MAS is repetitive as far as the same client is concerned b. Competence as a standard in the rendition of management services
c. MAS involves problem-solving affecting the future operations of by a CPA may be equated to having excellent scholarly preparation
the client to include the usual baccalaureate degree, an MBA, and other post
d. Beneficiary of service is management graduate studies.
c. Adequate training and experience in both the analytical approach 70. Mr. Rey Carlos, a CPA firm’s partner-in-charge of quality
and process in the particular undertaking are requisites for the CPA assurance and review is arguing with Mr. Reuben Fortuna, the
to be involved in a management service engagement. consulting partner regarding the question of independence as Mr.
d. A certified public accountant by virtue of having the necessary Fortuna is presently rendering consulting services to T. Ang and
academic preparation and by hurdling the licensure examinations Nga Co., an audit client of the firm. Related to this issue of
required to have a CPA license can readily render management independence, all of the following statements are not valid except
services to the public. a. Independence is never sacrificed for as long as the
auditor/consultant is correct in his decisions for the client.
64. These statements relate to MAS practice standards b. A CPA who renders both audit and consulting services to a client by
1. A practitioner is to notify the client of any reservation he has virtue of his competence/expertise and extensive knowledge of the
regarding anticipated benefits. client’s business is in the best position to render decisions for the
2. Throughout the engagement, there ought to be a systematic critical client and should do so.
review of accomplishments and work should be done within the c. The client is the ultimate decision maker and the auditor and/or
framework of the code of ethics and other professional standards. consultant should not make decisions for the client.
3. During the engagement, should there be a significant change d. It is us up to professional judgment and discretion of the auditor/
between cost and anticipated benefits, the client should be informed. consultant to render decisions for the client for as long as his
4. Before the engagement, the practitioner must make arrangements professional fees are commensurate to the benefit that the client will
with, and inform the client on significant matters related to derive from the engagement.
engagement, in writing.
71. Which of the following acts is not performed by an independent
Of these statements, which pertain to the practice standard on client CPA engaged to design the accounting system?
benefit? a. Formulation of the chart of accounts.
a. Statement 1 only. b. Design of business and accounting forms.
b. Statements 1 and 3 only. c. Supervision of implementation of system and procedures
c. Statement 1, 3 and 4 only. recommended
d. All statements. d. Preparation of an accounting manual.

65. Which of the following is not a qualification of a CPA in MAS 72. Which of the following will not impair the independence of a CPA
practice? in the rendition of Management Services?
a. Familiarity with the client’s financial accounting and internal a. The CPA performs decision-making services for his client.
control systems b. The CPA performs services wherein he is in effect, acting as an
b. Analytical experience in problem solving employee of the client.
c. Auditor of the client c. The CPA loses his objectivity and acts in a manner as if he is
d. Professional independence, objectivity and integrity advocating for the interest of his client.
d. The CPA does not extend his services beyond the presentation of
66. As a consultant, the CPA practitioner should recommendations or giving of advice.
a. Not take responsibility for making decisions and policy judgments
in MAS engagements. 73. A CPA should reject management advisory services engagement if
b. Exercise administrative control over the client’s staff to avoid a. The proposed engagement is not accounting related.
unnecessary delays in implementation. b. His recommendations are to be subjected to a review by the client.
c. Encourage dependence of client on the consultant’s staff so as to c. It would require him to make management decisions for an audit
pinpoint clear responsibility in implementing systems. client.
d. Conduct his engagement as if he is a member of the client’s d. He audits the financial statements of a subsidiary of the prospective
organization. client.

67. The Revised Accountancy Law incorporates the Code of 74. After preliminary audit arrangements have been made, an
Professional Ethics for CPAs. The provision of management engagement confirmation letter should be sent to the client. This
advisory services is among the areas of public accounting. It is, letter usually should not include
however, not exclusive to CPAs. Considering these premises, a. A statement that management advisory services would be available
which of the following statements is applicable? upon request.
a. Management advisory services as a field of practice is considered as b. An estimate of the time to be spent on the audit work by audit staff
an integral part of public accounting thus, the Code of Professional and management.
Ethics for CPAs covers management advisory services. c. A reference to the auditor’s responsibility for the detection of errors
b. CPAs in the practice of audit and management consulting services and irregularities.
may advertise and charge contingent fees. d. A statement that management letter will be issued outlining
c. The practice of management advisory services should not be comments and suggestions as to any procedures requiring the
extended to existing audit clients since this will adversely affect the client’s attention.
CPA’s independence.
d. CPAs in the practice of management advisory services are not 75. Staff management includes
bound by the Board of Accountancy but are bound by the said law a. manufacturing managers.
in the practice of audit. b. human-resource managers.
c. purchasing managers.
68. Which of the following statements is False? d. distribution managers.
a. CPAs provide management services to go around the ethical
constraints as mandated by the Accountancy Act. 76. Responsibilities of a CFO include all except
b. Businesses hire management consultants to help define specific a. providing financial reports to shareholders.
problems and develop solutions. b. managing short-term and long-term financing.
c. Included in the practice of consulting is the provision of confidential c. investing in new equipment.
service in which the identity of the client is concealed. d. preparing federal, state, and international tax returns.
d. CPAs performing management services may be considered to be in
the practice of management consulting. 77. All of the following report to the CFO except the
a. controller.
69. Which of the following statements is not acceptable? b. tax department manager.
a. A CPA represents three major players in the industry in c. production manager.
rationalizing the industry’s incentive before the government public d. treasurer.
hearing.
b. A CPA shares with a new and substantial client information 78. Management accounting is an integral part of the __________
regarding another client belonging to the same industry. function in an organization.
c. A CPA provides consulting services to an existing audit client. a. treasurer’s
d. A CPA offers and provides consulting services to two major b. controller’s
competing clients. c. internal audit
d. president’s
79. In comparing financial and management accounting, which of the 89. Which of the following functions is most directly related to
following more accurately describes management accounting management by objective?
information? a. Reporting
a. budgeted, informative, adaptable b. Control
b. historical, precise, useful c. Decision making
c. required, estimated, internal d. Planning
d. comparable, verifiable, monetary
90. Managerial accounting creates value by:
80. The ethical standards established for management accountants are in a. by forcing managers to analyze historical figures and interpret the
the areas of results
a. competence, licensing, reporting, and education. b. by eliminating all pricing and costing errors
b. budgeting, cost allocation, product costing, and insider trading. c. by focusing managers attention on the relationship between
c. competence, confidentiality, integrity, and objectivity. financial and non-financial factors
d. disclosure, communication, decision making, and planning. d. all of the above

81. Which of the following statements is true? 91. In determining whether planned goals are being met, a manager is
a. Management accounting is a subset of cost accounting. performing the function of
b. Management accounting is a subset of both cost and financial a. planning
accounting. b. motivating
c. Cost accounting is a subset of both management and financial c. controlling
accounting. d. follow-up
d. Financial accounting is a subset of cost accounting.
92. The managerial function of controlling
82. Which of the following statements is false? a. is performed only by the controller of a company.
a. A primary purpose of cost accounting is to determine valuations b. is only applicable when the company sustains a loss.
needed for external financial statements. c. is concerned mainly with a operating a manufacturing segment.
b. A primary purpose of management accounting is to provide d. includes performance evaluation by management.
information to managers for use in planning, controlling, and
decision making. 93. Which of the following is true of managerial accounting rather than
c. The act of converting production inputs into finished products or financial accounting?
services necessitates cost accounting. a. The outputs of this accounting system are the primary financial
d. Two primary hallmarks of cost and management accounting are statements
standardization of procedures and use of generally accepted b. The methods of this accounting system are established by an
accounting principles. overseeing board.
c. The accounting methods are standardized to allow comparisons
83. An organizational structure in which decision making is spread among companies
throughout different levels of management is known as __________ d. The accounting system would be unique to each company
management.
a. centralized 94. In a broad sense, cost accounting can be defined within the
b. decentralized accounting system as
c. strategic resource a. internal and external reporting that may be used in making
d. activity-based nonroutine decisions and in developing plans and policies.
BOBADILLA b. external reporting to government, various outside parties, and
stockholders.
84. The controller occupies: c. internal reporting for use in management planning and control, and
a. a line position. external reporting to the extent its product-costing function satisfies
b. a staff position. external reporting requirements.
c. neither a line nor a staff position, since the accounting department d. internal reporting for use in planning and controlling routing
must be independent. operations.
d. both a line and a staff position.
95. The cost management function is usually under
85. Obtaining feedback is generally identified most directly with which a. the chief information officer.
of the functions of management? b. purchasing manager.
a. Planning c. treasurer.
b. Controlling d. controller.
c. Directing and motivating
d. Decision making 96. The first step in managerial decision making is to
a. specify the standard or expected outcome.
86. All of the following would be considered staff functions except: b. gather information about the consequence of each alternative.
a. the vice-president of finance c. identify a problem.
b. the vice-president of corporate planning d. list alternative courses of action.
c. the vice-president of research and development
d. the vice president of marketing 97. Under which ethical standard of conduct does the managerial
accountant have the responsibility to disclose fully all relevant
87. In the planning and control process, what is the proper sequence of information that could reasonably be expected to influence an
events? intended user's understanding of the reports, comments, and
a. Set goals, set objectives, develop plans, implement plans, evaluate recommendations presented?
performance a. objectivity
b. Establish a master budget, set standard costs, develop variance b. confidentiality
analysis Bobadilla c. competence
c. Develop engineered costs, develop pricing targets, calculate d. integrity
contribution margins
d. Identify variable costs, identify fixed costs, project the sales mix, 98. Under which ethical standard of conduct does the managerial
determine breakeven accountant have the responsibility to refuse any gift, favor, or
hospitality that would influence or appear to influence his or her
88. Which of the following best describes what performance evaluation decision?
should be designed to do? a. competence
a. Modify goal and objectives each month b. integrity
b. Compare actual results to plan c. confidentiality
c. Establish sales goals and targets d. objectivity
d. Establish blame
99. Under which ethical standard of conduct does the managerial
accountant have the responsibility to prepare complete and clear
 reports and recommendations after appropriate analyses of relevant
and reliable information?
a. competence
b. integrity
c. confidentiality
d. objectivity

100. For managerial reports, the accounting data used:

a. must be the same accounting data for reporting to shareholders, but
may use different data for tax purposes.
b. must be the same accounting data for tax purposes, but may use
different data for reporting to shareholders.
c. must be the same accounting data for both tax purposes and
reporting to shareholders.
d. may be different accounting data for both tax purposes and
reporting to shareholders.