Seven things audit committees want from CFOs
Clear communication, ‘no surprises’ and a strong partnership with the CEO are some of the key things that audit committees want from their Chief Financial Officers (CFOs), according to recent research.
Deloitte surveyed hundreds of audit committee chairs and members across 20 countries as part of its CFO Insights research programme.
Here are the top seven things that audit committees want from CFOs:
1. Keep surprises to a minimum
While surprises can be an inevitable part of business, audit chairs and committees want the CFO to keep them to a minimum – and regular communication is vital if problems arise. Audit committees said that CFOs should manage the ‘avoidable issues’, and keep them up-to-date as quickly as possible when unexpected issues occur. Many of the audit committee chairs surveyed said that the CFO should feel comfortable using them as a ‘sounding board’ and contacting them outside of formal committee meetings.
2. A strong partnership with fellow C-Suite leaders
A CFO who has an effective partnership with the CEO and other C-suite leaders is high on the audit committee priority list. Audit chairs and committees believe that effective partnering and influencing skills are critical for CFOs. Audit committees will often observe the CFO-CEO relationship to determine how well the leadership team works together to achieve company goals.
3. A complementary finance team
Audit committees want to know that the company’s finance team is stable and complements the skills of the CFO. They also want to know that the organisation is developing the leadership skills of their finance team – and lining up potential successors to the CFO. The researchers said that it is “good practice” for CFOs to give the audit committee visibility on how they are developing their finance team, as well as keeping them informed of any staff changes.
4. Understanding of both accounting and business issues
A CFO that has a good command of both accounting and business issues is vital to audit committee chairs. If a CFO doesn’t come from an accounting background, then they need to make sure they can quickly get up to speed on the relevant accountancy, tax, regulatory and financial reporting issues for their organisation. On the other hand, for CFOs with strong accountancy experience, they need to ensure they understand the critical business issues facing the company.
5. Insight that tells the story behind the numbers
An insightful CFO who can explain the “story behind the numbers” of their forecasts and budgets is important to audit committees. They want a CFO who can clearly articulate the underlying assumptions and drivers of future performance – as well as a CFO who takes ownership of delivering more effective guidance on future cash flows.
6. Leading the organisation’s risk management
As well as managing the traditional financial and accounting risks, audit committees expect the CFO to lead on mitigating enterprise and operational risk. Audit committees also said that it is important that the organisation has clear reporting lines and a timely flow of risk information to assist in risk management.
7. Be an effective communicator
Audit committees want CFOs to give them clear, concise and regular communications, beyond board packages and regular meetings. They also said that the CFO should be an effective communicator with the investor community and other critical stakeholders, to demonstrate mastery over the business, financial and accounting issues of the company.