Academic journal article Journal of Accountancy

CPA Consulting Services: A New Standard

Academic journal article Journal of Accountancy

CPA Consulting Services: A New Standard

Article excerpt

The first Statement on Standards for Consulting Services (SSCS), Definitions and Standards, being issued this month by the American Institute of CPAs to supersede the current statements on standards for management advisory services (SSMASs), contains guidance that affects virtually every public practitioner. Its most significant impact is its definition of the broad range of functions considered CPA consulting services, not the establishment of new performance requirements. The statement also defines and describes the CPA's responsibilities on consulting engagements.

The SSCS (see page 164) establishes in the professional literature that CPAs also are consultants who provide a wide range of business and management services for clients. CPAs have always served as consultants to their clients. However, the terms used by the Institute for those services--management services and then management advisory services--did not communicate to clients and the public the full range of the CPA's consulting services.

The new SSCS supersedes the SSMASs on January 1, 1992. When the SSMASs were developed, MAS was viewed as a consulting service concerned solely with providing advice and technical assistance to management. Over the past decade, the changing marketplace has caused as steady evolution in the scope and mix of consulting services. Today, these services often go beyond the assistance envisioned in the original SSMASs. The current range of CPA firm consulting services is reflected in the six functions described in the new SSCS.


The new standards will help solve a significant problem. In the years since the SSMASs were issued, many members did not recognize that their business consulting services, often rendered informally, were either MAS consultations or MAS engagements as described in the SSMASs--and therefore subject to those standards.

The term "management advisory services" often is misunderstood as referring to a narrow set of services apart from those most CPAs in general practice provide to clients. The services frequently are thought to require training in disciplines not related to accounting. The service most widely recognized as MAS is computer consulting. However, members often don't realize other frequently provided consulting services (such as informal business advice, assistance to clients in securing loans, budgeting, business planning, business valuation, financial ratio analysis, cash and inventory management) are subject to the SSMASs.

The new statement makes it clear that all these services are consulting services. The statement applies to every member in public practice who provides a client with any of the services it describes. For example, one of the six practitioner consulting functions is to provide consultations (informal advice) on business and management matters. Therefore, an auditor or tax practitioner will be subject to the consulting services standards when providing such informal advice (unless it is excluded as being part of an excluded audit, tax or other service)--as well as any of the other, more formal, consulting functions identified in the SSCS.

Of the seven standards in the SSCS applicable to all consulting services, four come directly from Rule 201 of the AICPA Code of Professional Conduct and apply to all professional services, as does the entire code unless otherwise stated. The remaining three are very similar to the SSMAS standards. What is new is a clear statement of what kinds of services the SSCS covers, so practitioners will more easily identify the areas to which it does and does not apply.


Consulting services are defined as professional services that employ the practitioner's technical skills, education, observations, experiences and knowledge of the consulting process. The statement names and describes six functions subject to the SSCS. …

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