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Practical definitions of six consulting functions.

Many CPAs are key business advisers for their clients. They have earned this position of trust through demonstrated competence, integrity and objectivity. They help to disseminate good ideas among their clients and to prevent potential problems from becoming actual ones. In providing these services, CPAs now must adhere to the new Statement on Standards for Consulting Services (SSCS), Definitions and Standards, which supersedes the statements on standards for management advisory services (SSMASs). CPAs need to know which services fall under the new SSCS and how they differ from attest services.

The SSCS applies to a much broader range of services than did the SSMASs. Six practitioner functions fall under the SSCS. It would be impracticable to enumerate the separate consulting services that could be performed under these functional groupings; the groupings are used to enable CPAs to recognize when a service they perform is subject to the SSCS by identifying the purpose of the service or engagement.

Each of the six consulting functions is distinguished by characteristics focused primarily on its purpose and the CPA's role, not on the consulting service's subject. The consulting standards in the new SSCS apply to all six functions. This article expands on the SSCS descriptions of these functions so CPAs can better understand how the standard applies to them.


These are completed in a short time and based mostly, if not entirely, on the practitioner's existing personal knowledge. For example, during a meeting or over lunch, the client may seek initial informal advice on various matters, such as

* Should we centralize our distribution centers?

* Can our present accounting system handle our company's expanding needs?

* What is your opinion of our business plan?

* We are constantly short of cash. What are our financing alternatives?

Many consultations are initiated by practitioners who serve clients proactively by questioning their current pactices or mentioning future opportunities. A CPA might make observations such as

* Your customers wait two weeks for orders while your competitors give three-day service. Let's find the bottlenecks.

* We need to consider changes in technology and the possible resulting opportunities for your company.

* There may be ways to reduce your inventory, such as....

Consultations often result in formal consulting engagements involving one or more of the other consulting services. There may be no documentation of a consultation, but many believe a letter or memo outlining discussions with the client is appropriate and useful.


These usually involve detailed studies to develop findings, conclusions and recommendations for client consideration and decision making. They often require a significant understanding of business operations and the unique aspects of the client's industry. Some services require specialized technical knowledge of areas that go beyond the scope of accounting, such as compensation and benefits planning, systems design and marketing.

Advisory services may follow a consultation and precede implementation services. Client personnel may be assigned to the project team. They can bring considerable knowledge to the project's activities and can play a critical role in the acceptance and implementation of final recommendations. The consulting process defined in the SSCS typically involves determination of client objectives, fact-finding, definition of the problems or opportunities, evaluation of alternatives, formulation of proposed action, communication of results, implementation and follow-up. Except for the process of implementation and follow-up, this methodology often serves as the engagement structure.

Advisory services generally conclude with a written report that may include the project's objectives, the approach taken to perform the project, the data acquired, conclusions and recommendations and a plan for implementing recommendations.


These are primarily concerned with getting things done--putting into operation a plan or recommendations the client has accepted. Their success or failure may relate directly to the quality and completeness of any preceding advisory services. In some cases the practitioner may be engaged to perform an implementation service without having provided advisory services.

Services include implementing operational audit recommendations, a new incentive compensation system, changes to an organization's structure or an improved computer system.

Implementation services engagements may be quite complex and are generally administered using a detailed action plan that lists steps to be performed and specifies who's responsible for each, the budgeted time and the deadline. On large engagements, a majority of the project team may come from the client's ranks. Normally, the practitioner manages the implementation engagement but occasionally may provide only functional and technical expertise. On smaller implementation services engagements, the project team may consist of the practitioner alone. These services are action-based rather than report-based, but it is useful to end the engagement by advising the client of its completion and summarizing its accomplishments in writing.


These relate to a specific client transaction and generally involve a third party. Examples include insolvency services, business valuations, preparing information to obtain financing (excluding historical or prospective financial statements), analysis of a potential merger or acquisition and litigation services.

Transaction services do not focus on improving the economy, efficiency or effectiveness of an organization. Instead, they are concerned with a current or probable transaction. The practitioner's functions in transaction services may be a combination of the other consulting services but are transaction-driven. These services are treated separately because they often involve a third party and must be distinguished from attest services. Written reports may include the practitioner's own findings and conclusions, which are not an attestation to someone else's assertions.


These occur when the practitioner provides staff and other support services to accomplish tasks directed by the client. The CPA profession has highly talented and motivated professionals able to respond to client needs. These are usually short-term staffing needs but may be of a recurring nature.

Examples of these services include data processing facilities management, computer programming, bankruptcy trusteeship and controllership activities. The client determines a need and asks the CPA to supply one or more staff people to perform the work. In a data processing facilities management engagement, for example, the CPA firm may provide all staff needed to perform the client's data processing function and possibly the equipment as well.

Obviously, a CPA firm cannot audit a client and be considered independent if staff services involve assuming a management role. Some firms may resign as clients' auditors to provide staff support services that include a management role. Others may decline to accept such engagements to retain an audit. The client understanding for such services must be very clear and specific about the practitioner's responsibilities and the direction provided by management.


These occur when the practitioner provides a product and associated professional services in support of its installation, use or maintenance. A firm may develop or market products to help promote its professional services. Examples include a packaged training program and, most commonly, accounting software.

Products are a vehicle to offer cost-effective services to clients when a unique response to a client's needs is not necessary. The CPA's aim is the successful implementation and support of the product.


The definition of consulting services in the new SSCS is quite broad. By issuing the SSCS, the MAS executive committee and its practice standards and administration subcommittee have made it official that the six consulting functions provided by CPAs are appropriate professional services. The performance of all the consulting services encompassed by the six functions will be enhanced by this professional recognition and by the application of the three client-oriented standards established in the SSCS (see page 164).

ROGER E. MUNS, CPA, recently left the firm of Grantham, Randall and Muns to be chief financial officer of the Hughes-Rawls Corporation, Jackson, Mississippi. He was chairman of the American Institute of CPAs management advisory services practice standards and administrations subcommittee, which drafted the SSCS for the AICPA MAS executive committee. ROBERT S. ROUSSEY, CPA, is a partner in the Chicago office of Arthur Andersen & Co. WILLIAM E. WHITMER, CPA, is a partner in the Atlanta office of Ernst & Young. Messrs. Roussey and Whitmer are members of the MAS practice standards and administration subcommittee.
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Article Details
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Author:Whitmer, William E.
Publication:Journal of Accountancy
Date:Nov 1, 1991
Previous Article:CPA consulting services: a new standard.
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