Chief financial officer

Encyclopedia : C : CH : CHI : Chief financial officer

For other uses of the abbreviation "CFO" see CFO (disambiguation).

The Chief Financial Officer (CFO) of a company is the corporate officer primarily responsible for managing the financial risks of a business. This executive is also responsible for financial planning and record-keeping. In recent years, however, the role has expanded to encompass communicating financial performance and forecasts to the analyst community. The title is equivalent to finance director, commonly seen in the United Kingdom. The CFO typically reports to the Chief Executive Officer, and is frequently a member of the board of directors.

Background

Whereas a UK Finance Director is commonly a chartered accountant, it has become commonplace for non-accountants to become CFOs in the United States. Indeed, many CFOs have an MBA but no CPA or other accounting qualification. This has been criticised in some quarters as a contributory factor to the wave of accounting scandals seen in the US in 2002. The Sarbanes-Oxley Act of 2002 aims to address this by requiring at least one member of the company's Audit Committee to hold an accounting or finance qualification.

By comparison of CEO with CFO as strategic business partner and statutory duties under SEC and Sarbanes-Oxley Act, both are equal ranking top executive and separate posts.

Though there is no official industry benchmark, CFOs/Finance Directors of public listed corporations are ex-Big 4 accounting firm professionals, controllership exposure, BS in Accounting, and holder of CPA and or MBA.

Many CFOs without the formal credentials still have a thorough understanding of finance and a knowledge of problem solving through quantification.

Part-Time or Temporary CFO's

A more recent development is for small businesses to hire permanent, part-time CFO's or for medium-sized companies to hire a temporary CFO until a permanent CFO can be hired.

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