The International Federation of Accountants has released a discussion paper of the role and expectations of a CFO. According to the paper, a professional chief financial officer (CFO) should:
A. Be an effective organizational leader and a key member of senior management;
B. Balance the responsibilities of stewardship with business partnership;
C. Act as the integrator and navigator for the organization;
D. Be an effective leader of the finance and accounting function; and
E. Bring professional qualities to the role and the organization.
These five principles establish a framework for understanding the changing expectations, scope, and mandate of the person who exercises leadership in the most senior finance management position in an organization or in one of its separately managed units—that is, the CFO or equivalent, such as a finance director or vice president of finance.
These principles capture the key requirements of the CFO role and highlight what professional accountants need to do to prepare for finance leadership, as well as the benefits of a professional accountant serving as the CFO.
As part of good governance, organizations should place the responsibility of sound and ethical financial management and reporting, and more broadly the efficient and productive use of resources, under the oversight of a person with the necessary skills, qualities, and professional standards.
The training, expertise, and experience professional accountants bring to the CFO role should be seen as an advantage specifically in terms of uniting an ethical and technical mindset together with business acumen.
However, professional accountants in related finance leadership roles are far from universal. The most common level of education for a CFO is a degree in finance (29%) followed by a chartered (professional) accountancy qualification (27%) and an MBA (27%), according to a 2010 EY survey of 669 CFOs in Europe, the Middle East, India, and Africa, conducted by the Economist Intelligence Unit.
Recently, the number of professional accountants in the CFO role has declined in some jurisdictions, particularly in larger organizations. However, this decline is reversing in some locations, such as in the US where CFOs who were also Certified Public Accountants increased to 38%, up from 25% in 2006.2
This trend has significant implications for professional accountancy organizations (PAOs) in their efforts to adequately prepare professional accountants for career progression to finance leadership.
Building on Competent and Versatile: How Professional Accountants in Business Drive Sustainable Success, this discussion paper starts a global debate among PAOs and employers of professional accountants on the key implications of the changing expectation on CFOs for the education, training, and development of professional accountants.
IFAC seeks to encourage a dialogue on both the principles and proposed recommendations to prepare aspiring accountants to acquire and develop the skills needed to be an effective finance and organizational leader. The proposed actions are relevant for PAOs, which need to continually review their qualifications and training at both a pre- and post-certification level, and for employers of professional accountants, who also directly influence preparation for leadership.
Finally, this discussion is also relevant to the regulatory community that is striving for well-governed organizations and market integrity. The CFO is a critical part of a chain of actors, including the governing body (i.e., board of directors), chief executive officer (CEO), audit committee, and auditor that all have their respective responsibilities to ensure that business reporting provides relevant, faithful, and comparable information on the financial position and performance of an organization. Having professional accountants in key finance leadership roles is an important part of ensuring well-governed organizations.
Unlike the role of auditors and assurance professionals, which is typically subject to oversight and registration, qualification, competency, and licensing requirements, finance leadership in organizations is largely unregulated. In this context, the onus is on organizations to ensure they employ finance leaders with the prerequisite professional qualities and competence. In 2009, in its submission to the Group of Twenty (G20), IFAC recommended that the G20 call for the establishment of an international, principles-based competency threshold for senior financial officers in public interest entities.
The increasing expectation of CFOs and finance and accounting (F&A) functions also extends to government and public sector organizations, where there is a clear need for enhanced finance leadership and public financial management to improve the quality of public sector transparency, accountability, and outcomes. The transparency, financial stability, and performance of governments and public sector organizations are closely linked with quality and professionalism of the CFO and the F&A function. Consequently, CFOs’ expertise and advice are essential elements in an effective leadership team as well as for ensuring that strong management practices and information systems, supported by an appropriate governance infrastructure and ethical culture, are in place.