IFAC Report Highlights Five Guiding Principles of the CFO
by Terri Eyden on
By Jason Bramwell
A new report from the International Federation of Accountants (IFAC) highlights what professional accountants need to do to prepare for a finance leadership role.
According to the study, The Role and Expectations of a CFO, the following five principles guide the changing expectations, scope, and mandate of the CFO:
- Be an effective organizational leader and a key member of senior management.
- Balance the responsibilities of stewardship with business partnership.
- Act as the integrator and navigator for the organization.
- Be an effective leader of the finance and accounting function.
- Bring professional qualities to the role and the organization.
"In these tough economic times, the objectivity and values of the professional accountant can be of enormous value to finance leadership positions in organizations in every economic sector," Roger Tabor, chair of the IFAC Professional Accountants in Business (PAIB) Committee, said in a written statement. "But professional accountants in finance leadership roles aren't universal and, in some parts of the world, their numbers are declining. So it is more important than ever for the profession to develop outstanding professionals who are well-equipped to work in business and government, and to take on finance leadership roles."
The IFAC believes the principles and recommended actions included in the report will raise awareness of the implications for the education, training, and development of professional accountants. The IFAC will use the report as a way to engage professional accountancy organizations (PAOs), employers, and other stakeholders to share and enhance approaches to preparing professional accountants for finance leadership.
"An increasing number of PAOs provide specific and targeted support structures and services to help their preparation for senior finance leadership positions," the IFAC stated in the report.
The IFAC highlighted the following three approaches PAOs can use to prepare accountants for a strategic leadership role:
- Establishing within the PAO dedicated governance-support structures for professional accountants in business to help identify and deliver appropriate support and development activity, such as establishing the professional accountant in business-focused faculties, interest or advisory groups, and committees.
- Promoting and supporting credentials specifically for professional accountants in business.
- Providing a broader range of specific continuing professional development courses and training opportunities that help prepare aspiring accountants to senior leadership roles, assisting in development of business skills needed to be an effective CFO. These are often delivered through collaboration arrangements with third-party institutions and education providers, such as university business schools, which provide access to relevant postgraduate educational programs that can assist preparation for management leadership.
How to Participate
The IFAC will use The Role and Expectations of a CFO report in conjunction with outreach to initiate a global debate among professional accountancy organizations, professional accountants, and other stakeholders. Comments can be submitted electronically on the IFAC website, using the "Submit comment" button on the discussion paper page.
The IFAC also believes the report is important to the regulatory community, which strives for well-governed and managed organizations.
"The CFO is a critical part of a chain of actors, including the governing body (board of directors), 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," the IFAC stated in the report. "Having professional accountants in key finance leadership roles is an important part of ensuring well-governed organizations."
According to Susanna Chiu, chair of the PAIB Committee's Role, Domain, and Competency Advisory Group, working closely with employers to understand their needs and requirements helps the accounting profession deliver business-ready accountants.
"The education and training of professional accountants should incorporate broader managerial capabilities and skills," Chiu, who is also the president of the Hong Kong Institute of CPAs and director of Li & Fung Development Ltd. in China, said in a written statement. "PAOs should foster a commitment to lifelong learning and become more innovative in how they engage and serve professional accountants in business."