THE CPA LICENSURE EXAMINATION SYLLABUS

MANAGEMENT ADVISORY SERVICES

(Effective October !!" E#$%i&$tio&'
This subject tests the candidates' knowledge of, and proficiency in the concepts,
standards, techniques, and methodology applicable to management services /
consultancy practice by CPs! management accounting! financial management"related
services! capital budgeting concepts and techniques! and project feasibility studies#
$ach e%amination will contain a minimum of &' and a ma%imum of (' multiple
choice questions, allocated to the different subject areas, as indicated below#
()! M$&$*e%e&t Acco+&ti&*,Re-$te. Service/
)#) *ole, historical perspective, and direction of management accounting
a# +bjectives, scope, relationship with financial accounting and cost
accounting! role and activities of management accountant! controller as top
management accountant! organi,ation structure and management
accountant! the changing role and e%panding role of management
accountant#
b# -anagement ccounting .nformation /ystem -anagement functions and
accounting! information needs of managers and other users for planning and
control 0value chain and enhancing the value of management accounting
system1! international aspects of management accounting
c# -anagement ccounting and $thical Conduct $thical behavior and code of
conduct of management accountants! Code of conduct on the international
level
d# Current focus of -anagement ccounting .mpact on organi,ation
structure! focus on the customer! cross"functional teams! computer
integrated manufacturing! product life cycles and diversity! time"based
competition! global competition! information and communication technology
management! just"in"time inventory! total quality management! continuous
improvement and benchmarking! cost management system! computer"aided
design and manufacturing automation! e"commerce#
e# Certification available to -anagement ccounting The .nstitute of
-anagement ccountants and C- Certification
)#2 3oundations of management accounting
a# 4nderstanding and analysis and interpretation of financial statements
)# +bjectives, general approach, limitations and steps in financial
statements analysis
2# .dentification of matters for further interpretation of information
produced! assessment of the impact of price level changes in financial
analyses
5# nalysis of business performance and financial position such as
comparative financial statements, trend percentages, common"si,e
financial statements, financial ratios! cash flow analysis and gross
profit variation analysis
b# Cost terms and concepts / cost behavior / design of cost and management
accounting systems
)# 6ature and classification of costs
2# 7asics of cost behavior! cost classification on financial statements!
flow of costs in manufacturing, commercial, trading or service
companies
5# /plitting mi%ed costs " high"low method, least"squares regression,
scatter graph
8# /ystem design9 :ob order costing and process costing
&# /ystem design9 ctivity"based costing and management! rationale,
advantages, limitations and design of an 7C system#
c# ;ariable costing and absorption costing
)# 4nderlying concepts, advantages and disadvantages of variable
costing
2# Comparison between variable costing and absorption costing
5# Preparation of financial statements under variable and absorption
costing including reconciliation of net income
d# 7usiness planning
)# +bjectives and uses of a business plan
2# <istinction between a business plan and strategic plan
5# /etting short term objectives consistent with long term strategies
8# <evelopment of business plans to meet agreed objectives! basic
segments and contents of a business plan
&# /trategic planning
)#5 -anagement accounting concepts and techniques for planning and control
a# Cost"volume"profit relationships
)# 7asic concepts, significance, uses, assumptions and limitations of
C;P analysis
2# C;P analysis with changes in cost structure! C;P analysis for a
multi"product firm
5# Concept of margin of safety, operating leverage and profit planning
b# *esponsibility accounting, transfer pricing, performance evaluation, and
balanced scorecard
)# =oal congruence and motivation
2# Types of responsibility centers 0revenue, cost, profit and
investment1! transfer pricing " rationale and need! alternative transfer
pricing schemes and multinational transfer pricing
5# dvanced analysis and appraisal of performance9 financial and non"
financial performance measures
8# Performance measurement in multinational companies!
distinguishing performance of managers from performance of
organi,ation units! e%ecutive performance measures and
compensation! environmental and ethical responsibilities
&# 6ature of the balanced scorecard! perspectives of the balanced
scorecard! aligning the balanced scorecard to strategy! features of a
good balanced scorecard! pitfalls when implementing a balanced
scorecard
># $valuation of the success of strategy! strategic analysis of operating
income
c# 3unctional and activity"based budgeting
)# <efinition of budget
2# <ifference between planning and control
5# 3unctions of budgeting
8# The purposes of the budget
&# dvantages and limitations of budgets
># Types of budgets
(# 7udgeting terminologies defined
?# The management process of preparing the master budget
@# The budget period
)'# 7udget cycle of a manufacturing firm
))# /teps in developing a master budget
)2# Comprehensive budget illustrated
)5# 3le%ible budgeting
)8# 3i%ed and fle%ible budget variance compared
d# /tandard costing and variance analysis
)# *ationale, users, benefits, limitations of standard costs!
international uses of standard cost! how standards are set!
performance measurement using variances! operating performance
evaluation
2# nalysis of variances
0a1 <irect material variances 0price, quantity, mi% and yield
variances1
0b1 <irect labor variances 0rate, efficiency, mi% and yield
variances1
0c1 3actory overhead variances " Two"way method 0budget
variance and volume variance1! Three"way method 0spending
variance, variable efficiency variance and volume variance1!
3our"way method 0variable spending variance, fi%ed spending
variance, variable efficiency variance and volume variance1
)#8 -anagement accounting concepts and techniques for decision making
a# Auantitative techniques
)# *ationale in using quantitative techniques
2# <ecision theory
5# <ecision making under certainty / under uncertainty! assigning
probabilities! e%pected value of perfect information! pay"off
8# =antt chart9 preparation, illustration, advantages
&# <ecision tree9 underlying concepts, advantages and
limitations,
steps in making a decision tree, illustrative problem9 preparation of
a
decision tree
># Binear programming9 nature and application, steps in
formulation
of a linear program, computational methods of linear
programming
0graphic and simple%1! /hadow prices
(# /ensitivity analysis
?# Aueuing theory
@# Program evaluation and review techniques 0P$*T19 basic
underlying
concepts, e%pected activity time, concept of critical path,
cost
estimating, crashing the network, P$*T " cost network, variation
in
activity time, variation along a path, accountant's role in P$*T,
benefits and limitations of P$*T
)'# Bearning curve
b# 4sing accounting information in decision making, relevant costs
and
benefits
)# <ecision making process
2# .dentifying relevant costs
5# pproaches in analy,ing alternatives in non"routine
decisions
8# Types of decisions
-ake or buy decisions, adding or dropping product segments, sell
now or process further, special sales pricing, utili,ation of scarce
resources,
shutdown or continue operations, pricing products and services,
and
other business decisions requiring quantitative
analysis
c# Capital budgeting decisions
)# <efinition, characteristics, categories, and elements of
capital
budgeting decisions
2# 6et investment, net cash returns, cost of capital, screening
capital
budgeting projects
5# 6on"discounted cash flow methods " payback, payback
reciprocal,
bailout, accounting and average rate of return
8# <iscounted cash flow methods " net present value,
profitability
inde%, discounted payback and internal rate of return!
equali,ed
annual return 0ear1
&# /creening decisions " independent projects! preferences
decisions
" mutually e%clusive projects, ranking investment projects!
capital
rationing, sensitivity analysis! 6P; point of indifference 0fisher
rate1
d# <ecentrali,ed operations and segment reporting
)# <ecentrali,ed operations
0a1 6ature of decentrali,ed operation
0b1 dvantages of decentrali,ation
0c1 Bimitations of decentrali,ation
2# /egment reporting
0a1 Bevels of segmented statement
0)1 /egmented income statement in the
contribution
format
021 /ales and contribution margin
051 Traceable and common fi%ed costs
081 Problems related to proper cost
assignment
0i1 +mission of costs
0ii1 .nappropriate methods for allocating costs
among
segme
nts
0iii1 rbitrarily dividing common costs
among
segme
nts
)#& dvanced management control and strategic performance
measurement
a# dvanced analysis and appraisal of performance9 financial and
non"
financial
)# 3inancial and nonfinancial performance measures
2# /teps in designing accounting"based performance measures
5# Performance measurement in multinational companies
8# Computation of foreign division's *+.
&# <istinguishing performance of managers from performance of
organi,ation units
># 3inancial and nonfinancial incentives
b# -anaging productivity and marketing effectiveness
)# -anaging productivity
2# -easuring productivity
0a1 Partial productivity
0a1 Partial operational productivity
0b1 Partial financial productivity
0c1 dvantages / limitations of partial productivity measures
0b1 Total productivity
0)1 7enefits and limitations of total productivity measures
5# -anaging marketing effectiveness
8# /ummary of variance analysis to assess marketing effectiveness
c# $%ecutive performance measures
)# +bjectives of management compensation
2# $%ecutive performance measures and compensation
5# Cash compensation
8# 6oncash compensation &# 7onus plans
0a1 7ases for bonus compensation
0b1 7onus compensation pools
0c1 7onus payment options
2# Performance measures at the individual activity level
5# Performing tasks
8# Team"based compensation arrangements
&# $nvironmental and ethical responsibilities
)! M$&$*e%e&t Co&/+-t$&c0 Pr$ctice b0 CPA/
n overview
a# $volution of -/, developing trends, future prospects
b# 6ature of -/ by independent accounting firms, rationale of using
management consultants, independent accounting firm's role in -/ and
CP's objective engaging in -/
c# reas of -anagement dvisory /ervices
reas of -/ practice9 traditional and emerging! <etermining scope of
service! Types of client served
d# Professional attributes of management consultants 0technical,
interpersonal and consulting process skills1
e# Code of ethics for professional accountants in the Philippines applicable to
non"assurance services
f# +rgani,ation and management of the -/ practice
2#2 /tages of management consulting engagement
2#5 Project management and control
2#8 Presentation of engagement reports
2#& -anagement of the client relationship
2#> -anagement of people relationships
2#( -anaging the quality of consulting engagements 5
1)! 2i&$&ci$- M$&$*e%e&t,Re-$te. Co&/+-t$&c0 Service/
5#) 3inancial forecasting
a# *ole of financial management
b# +bjectives of the firm
c# 6ature of financial forecasting d# /teps in financial forecasting
d# Projected financial statement method
5#2 Corking capital management and financing decision
a# 7asic concepts and significance of working capital management
b# Corking capital policy, advantages of adequate working capital,
disadvantages of inadequate or e%cessive working capital, alternative
current asset investment and financing policies, risk" return trade off,
e%ternal financing needed 0$361
5#5 -anagement of current assets
a# +bjectives of current assets management! cash conversion cycle
b# Cash and marketable securities management
)# +bjectives, reasons for holding cash, cash management techniques
2# *easons for holding marketable securities, factors influencing the
choice of marketable securities
c# *eceivables management
)# +bjectives, factors in determining accounts receivable policy, costs
associated with accounts receivable, summary of trade"offs in credit
and collection policies
2# -arginal or incremental analysis of credit policies
d# .nventory management
)# +bjectives, reasons for carrying inventories
2# .nventory management techniques
5# .nventory control systems
5#8 /hort"term credit for financing current assets
a# 3actors in selecting source of short" term funds
b# $stimating costs of short term funds
c# /ources of short"term funds
d# /ecured short"term financing " pledging of accounts receivable, factoring
accounts receivable! inventory financing
5#& Bong"term financing decisions
a# 7asic concepts, basic tools of capital structure management
b# 3actors influencing capital structure decisions
c# .ncorporating capital structure into capital budgeting! weighted average
cost of capital 0CCC1 d# $ffects of operating leverage and financial leverage
on capital structure! optimal capital structure
5#> /ources of financing
a# .ntermediate and long"term financing
)# Principal sources of funds
2# <ebt financing
0a1 7enefits and drawbacks of debt
0b1 Term loans
0c1 7onds or long"term debt
0)1 *etirement of bonds
5# $quity financing
0a1 +rdinary shares
0b1 *etained earnings
b# Dybrid financing9 Preference shares, leasing, options, warrants, and
convertibles
)# Preference share
0a1 dvantages and disadvantages of issuing preference share
2# Beasing
0a1 Potential benefits from leasing
0b1 Capital or finance lease
0c1 +perating lease
5# Convertibles
8# +ption
&# Carrants
3)! Pre4$r$tio& of Pro5ect 2e$/ibi-it0 St+.ie/ E&*$*e%e&t/
8#) 6ature, purpose and component, development and analysis of project revenue
costs under specific assumptions
8#2 Procedures in the preparation of projected financial statements
8#5 nalysis of financial projections
6)! I&for%$tio& S0/te%/ E&*$*e%e&t/
&#) -anagement .nformation /ystems $ngagement
a# 3undamentals of computer"based processing <ata processing defined!
data and information distinguished! basic elements of data processing
system and operation! methods of data processing! overview of computer"
based data processing! components of the computer system! flowcharts!
hierarchy of computer processes! modes of computer operations!
telecommunications#
c# ccounting information system engagement 7asic concepts! objective of
an accounting information system, its essential elements and
characteristics! basic components of a manual accounting system!
overview of a computeri,ed accounting information system! difference
between manual and computeri,ed processing system common business
applications of computers
d# .nformation systems audit

")! Ot7er Co&/+-t$&c0 Service/
>#) +perational auditing
a# 6ature
b# $ffectiveness versus efficiency! economy
c# +bjectives of operational audits
d# /cope of operational audit
e# <istinction between operational auditing and financial auditing
f# Types of operational audits
g# Cho performs operational auditE
h# =eneral approach to operational audit
)# Planning phase
2# $vidence accumulation and evaluation
5# *eporting and follow"up
i# .llustrative reports
j# $%amples of operational audit findings
>#2 7usiness process improvement / *e"engineering consultancy services
a# 6ature and objectives b# pproach
8)! B+/i&e// E&viro&%e&t $&. Co&ce4t/9
(#) 7usiness structure
a# dvantages, implications and constraints of legal structure for business
)# /ole proprietorship and general and limited partnership, corporation
2# Bimited liability companies 0BBC1, limited liability partnership 0BBP1
and joint ventures
b# 3ormation, operation, and termination of business
c# 3inancial structure, capitali,ation, profit and loss allocation and
distribution d# *ights, duties, legal obligations and authority of owners and
management 0directors, officers, stockholders, partners and other owners1
(#2 $conomic concepts essential to obtaining an understanding of the entity's
business and industry
a# 7usiness cycles and reasons for business fluctuations
b# $conomic measures and reasons for changes in the economy, such as
inflation, deflation and interest rate changes
c# -arket influences on business strategies, including selling, supply chain
and customer management strategies d# .mplication to business of dealings
in foreign currencies, hedging and e%change rate fluctuations
a# F To be effective in the October 2007 Examination b#