Publication

On June 5, 2013, members of the North American Audit Committee Leadership Network (ACLN) met in New York to discuss the audit committee’s relationship with the chief financial officer (CFO) and the finance organization, among other topics.

This document summarizes the key points that members raised in the discussion, along with background information and perspectives that members shared before the meeting.

The roles of the CFO and the finance organization are expanding and shifting, and audit chairs are adapting their oversight in response to these changes. ACLN members emphasized three general points, which are summarized below and described in more detail on the following pages:

• CFOs and their teams are taking on a broader set of responsibilities
  Changes rooted in the financial crisis, globalization, and accelerating technology advances are putting new pressures on CFOs and the finance organization, leading to the emergence of CFOs who handle a broader range of responsibilities in investor relations, major transactions, and international control policies and standards. CFOs increasingly partner with the CEO in developing and implementing company strategy. This role necessitates a strong relationship between the CFO and the CEO, characterized by both collaboration and “constructive tension.” It also requires support from a strong team of finance executives, operating as a well-balanced “Office of the CFO.”

• Audit chairs need a strong relationship with the CFO
  The audit committee relies on the CFO as a key source of information for its oversight duties. ACLN members underscored the importance of building trust between the audit chair and the CFO, a process that involves engaging in high-quality dialogue and rewarding candor when discussing problems. Members reported frequent interactions with the CFO, supplemented by regular engagement with other finance executives.

• Audit chairs want a detailed understanding of the finance organization
  Audit chairs assess the overall health of the finance organization by interacting with staff more broadly, checking with internal audit, and raising issues in more informal settings. While members reported a range of involvement in the annual evaluation of the CFO, many said they play a significant role in choosing a new CFO. The external auditor can provide valuable input on the CFO and the finance organization more generally, but such input should be sought in the context of a strong relationship between the audit chair and the audit partner.