What audit committees really want from CFOs, an article in the December 15 issue of Deloitte’s CFO Insights, lists seven things that audit committees want from CFOs – and five they don’t. These dos and don’ts are based on Deloitte’s engagement with CFOs in labs and forums, on interviews with audit committee chairs and members, and on client interactions. The suggestions for CFOs may be useful to audit committees as they think about the quality of their relationship with the CFO and how it might be strengthened.
The seven desirable behaviors are:
No surprises. “CFOs need to have a strong relationship and trust with the audit committee and clearly communicate in a timely and candid manner so the committee isn’t caught off guard.”
Strong partnering with the CEO and other leaders. “Effective partnering and influence skills with the CEO and other C-suite leaders are critical imperatives for CFOs. In fact, audit chairs and board members often observe CFO-CEO and CFO-peer relationships to gauge how well the leadership team works together to achieve company goals.”
Confidence in finance organization talent. “A good practice for CFOs is to give the audit committee visibility into their key staff and have candid discussions on how they intend to develop talent. It’s also important to convey plans to change staff well ahead of time to forestall misunderstandings with committee members. CFOs and audit committees also should discuss succession planning at least once a year, typically in an executive session.”
Command of key accounting, finance, and business issues. “CFOs need to have full command of the key technical accounting, financial reporting, tax compliance and planning, control environment, finance, or treasury issues pertinent to their companies—within the C-suite, with the board and audit committee, and with broader stakeholders.”
Insightful forecasting and earnings guidance. “[B]eyond forecasts and guidance, what many audit committees really want is an insightful CFO—one who can clearly articulate the underlying assumptions and drivers that guide estimates of future performance.”
Effective risk management. “Some audit committees expect the CFO to take a leading role in managing enterprise and operational risk beyond traditional financial, accounting, and regulatory compliance risks.”
Clear and concise stakeholder communications. “Audit committees generally expect clear and concise communications from CFOs that put the numbers and risks in context, offering fresh insights. In addition, communications with analysts and investors should demonstrate their mastery over the pertinent business, financial, and accounting issues.”
The things CFOs should avoid are:
Get exposure for your finance team—but not all at once. “It’s important for the audit chair to know who is in attendance, even the folks standing up in back. A crowd is likely to inhibit any candid back-and-forth.”
Strategic thinking comes packaged in brevity and synthesis. “CFOs may be tempted to share their commanding knowledge of the business or the industry or both. * * * But with minutes at a premium, CFOs can be more useful by, say, boiling their presentation down to three strategic objectives.”
Look for input, rather than seeking validation. “CFOs should come to the audit committee with a proposed solution, then engage the committee members in helping finalize a decision.”
Don’t recreate three-ring binders. “It’s important to make sure that pre-reads contain the right level of information—strategic, with an executive summary of what is included in each section, and clear indications of areas of focus or actions.”
Accept coaching, whether or not you agree you need it. “If a CFO’s presentation comes across as unfocused or tedious, for instance, a supportive committee chair will take steps to offer constructive feedback and coaching.”