OVERVIEW OF MANAGEMENT COSULTANCY SERVICES BY CPAs

Introduction to the World of Consulting

What is a consultant?

What are the reasons for becoming consultants?

Basically, a consultant is a person with a marketable skill, a perceptive mind, a need for independence and challenge, an ability to communicate with others and persuade them
to follow advice, a desire to help others in an effective way, and a wish to be an agent of positive change.

In general, the people who go into consulting include:

- People frustrated with their current careers, who see the solutions for problems but are unable to effectively influence decision –makers
- People who want a stimulating, dynamic, growing career that satisfies the need for personal development
- People dissatisfied with the lack of challenge, opportunity, or creativity in their existing jobs
- People graduating from school with training but little experience who wish to work for a large consulting firm
- People who are between jobs and seeking new opportunities and careers
- People who see that they may be laid off and wish to establish themselves in a business to earn a livelihood; these people may start on a part-time basis while still
employed
- Retired people who have expertise and wisdom to offer
- People who wish to supplement their present income by using their managerial expertise or technical and academic skills
- People with work experience and industry knowledge or other skills who want to combine a family life with work at home
- People who understand government operations and the contract process, or who have built up contacts in government, politics, or industry over the years

A lot of people make good money as consultants but to many people, the benefits of being a consultant go far beyond the size of their bank accounts.
In a market research published in 2007 by consulting experts, both consulting revenues and profits are up and are projected to continue to grow well into the future.
Reason:
- Skilled consultants can be brought into an organization on short notice, solve a problem and then move on to another organization in need.
- There is no need to hire someone, pay them high salary and provide them with benefits and even retirement plan.
- Most compelling nonmonetary reasons people enter the consulting field:
 Sharing their knowledge to help their clients
 Building business network and take a step up in one’s corporate career
 Having on boss, being independent and making their own decisions
 No fear of being laid off
 Having a flexible source of income
  A means of giving back to the community by providing expertise and assistance in community-based projects.
- To many, a major attraction of becoming a consultant is starting their own consulting firm and many thousands of consultants have been successful in transitioning to
being their own bosses and are enjoying the financial, professional and lifestyle benefits that result.

Evolution of MAS
- Auditing, accounting system design and Installation, and income tax work have been the traditional areas of expertise for CPA firms. The field of management
consultancy has, however, become a rapidly growing new area.
- When CPA firms during the course of an audit discovered problems in a client’s business, it was natural for them to make suggestions for corrective action. In response,
the client often engaged the CPA to make a thorough investigation of the problem and to recommend new policies and procedures needed for a solution.
- Gradually, public accounting firms found themselves becoming more and more involved in management consulting work.
- The progressive public accountants have found management consultancy a natural area of development of their practice because many of these assignments involved
planning and control systems that relied heavily on accounting and related statistical information. In recent years, responding to the increasing demands of clients for
outside assistance, CPA firms have created separate management advisory service divisions which are staffed by industrial engineers, lawyers, statisticians, psychologists
as well as accountants. The qualifications of management consultants sometimes include special training and experience, skills and research capabilities to apply an
analytical approach to the solution of management problems.
- Because of increasing complexity of business, more and more small and medium-sized businesses are looking to their auditors for help in the areas of controllership.
However, as management advisory services are extended further into other areas, some members of the profession feel that there is increased pressure against
independence of the CPA which cannot just be taken lightly. The accounting firm should therefore strive at all time to limit itself to providing advice and technical
assistance to clients and avoid making management decisions or taking positions that might impair its objectivity.
- Management consulting
 A profession whose members provide extremely useful services to business managers.
 Growing at an accelerating rate and the end of this growth trend is not in sight.

Developing Trends
- The practice of management consulting has changed dramatically since the mid 90’s.
 Management consultancy now specializes in information systems, automated offices, financial analysis and modeling budgeting and cost controls, organization
structures, personnel compensation, strategic planning and a host of other areas.
- Improvement of business education
 The quality undergraduate and graduate programs in business are producing better-trained entrants into the ranks of management consulting profession. As a
result of this infusion, management consulting is becoming a catalyst for the advancement of better management concepts and techniques.
- Change in management culture as well as growth in size and complexity of institutions
 Competition has forced companies to re-engineer their inefficient business processes and re-train their work force. Companies have begun to exercise self-
governance where even the lowest unit or employee/worker is empowered to make decisions and be accountable for those decisions.
- Technological developments have occurred at a breathtaking pace in such areas as information sciences and decision sciences.
  Computer hardware and software, together with data communication and robotics represent powerful tools for business management.
 Globalization takes place because enhanced telecommunications technology can now substitute physical travel

Future prospects
These forces of change are deemed to affect any country, any industry and profession. Management consultancy is not going to be spared from the effects evolving from
development and transformations. A veteran management consultant makes the following predictions:
1. Management consulting will become even more specialized. Consulting firms will need to continually add new specialties, just as manufacturing firms add new
products.
2. The consultants’ orientation will be towards being an insight-provider, creator and sharer of information
3. Management consulting firms will tend either to remain small or to become quite large. Small firms will prosper by focusing upon narrow areas of specialization
while large firms will have to develop and offer a wide range of services to sustain their high costs of operations
4. As consultants grow in number, they will develop more sophisticated means of marketing their services
5. Bright graduates of accounting, management and business schools will continue to be attracted to careers in management consulting

The Consulting Industry

The consulting industry is large. Most definitions of consultancy would include the following:
a. Information technology (IT)
b. Consulting and system integration
c. Corporate strategy
d. Operations management
e. Human resources management
f. Outsourcing
In 2002, for the first time in three decades, the market fell by 6% (Gidron, 2003, www.feaco2003.com/pdf/gil.gidron.pdf[25 September 2003]) due to a tougher IT market and an
increased skepticism among consultancy clients following the Enron/Andersen scandal. The net result has been a reduction in the number of consultants employed and also a
reduction in the average fee rate. The industry however is predicted to grow after a flat year in 2003 due to three main factors. These are:
1. Increase in demand from industries to bring in specialists to manage non-core activities when they are needed. Globalization and information technology have increased
in complexity and competitiveness of the environment in which business operate and managers want to stick to their core expertise
2. Continued demand for IT spending. The Internet has a major impact on the way many established industries operate. For example, the airline industry has used e-
ticketing to drive down operating costs
3. Growth of consulting due to increasing demand from governmental and associated organizations. Government departments are now outsourcing work and offering
tenders to private firms for capital projects.
The consulting industry has a relatively low concentration. It is fragmented and includes a number of sectors. In general the trend is for players to be large with a global reach or
small and offering a specialized service.
The main types of consultant firms are as follows:
a. IT firms
IT companies have increasingly looked towards consulting as a means of increasing revenue. The recent trend has been to buy consulting businesses, for example, IBM’s
purchase of PwC Consulting. As a result, IBM has significantly increased its market shares in consulting businesses.
b. Accounting Firms Offering Consultancy
A major change in US accounting practice occurred following Andersen’s woes and the consequent implementation of the Sarbanes-Oxley law. May accountancy firms
have sold off their mainstream consulting operations either to management or to other consultancies (particularly IT). Consultancy services are still offered but they
tend to have a narrow focus around financial and transactions (mergers and acquisition) services.
c. Major Consulting Only Firms
There are a number of large firms with a global reach. They offer a wide range of services but their core business is consulting. The big names are McKInsey & Co.;
Accenture and Mercer Management Consutling; IBM; Atos KPMG Consulting; Deloitte Consulting and Cap Gemini Ernst & Young.
d. Independents
Many individuals run their own consulting services as sole traders, as small limited companies and partnerships. They offer a range of services, often quite specialized.
Professional bodies such as PICPA offer professional training and accreditation and provide a forum for all important networking

Career Structure in Consulting Firms

All management consultancies organize themselves in their own way but they can be quite hierarchical in their structures especially the larger firms. This structure provides a
definite ladder for gaining experience, building expertise, and developing a career. In practice, teams that cut across levels of responsibility undertake most consulting projects.
Most consultancies, being team-based