@FEI Blog: The Problem With The Non-CPA CFO

I made another guest post at the blog for Financial Executives International.  My BBF (best blogger girlfriend) Edith Orenstein is on vacation.  The post is cross-posted over at accountingWEB, because Edith is so good and so popular.  She’s been my go-to girl for a while when it comes to technical accounting support and general navigation around the accounting world acronyms such as FASB, IASB, FAF, COSO, and IASCF.

How many of those do you know?

I had a long chat with a reporter last night about the role of the audit committee when it comes to hiring, firing and monitoring the auditor.  The reporter told me that audit committee members tell her they’re not worried about fees but about the quality of the auditor.

That may be true, but what happens when a non-accountant, non-CPA investment banker is the CFO?  You can bet your bottom dollar he’s less interested in answering questions about GAAP than he is about paying as little as possible for the piece of paper that allows him to go out and raise more capital.

In these recessionary days, how does an audit committee respond to that kind of pressure from the C-suite?

I don”t know what really happened at American Apparel. The reports say Deloitte resigned.  If Deloitte saw a huge risk in the thirty-one year old dilettante CFO and cut their losses, well, good for them.

Do you remember the last time we had a high-profile non-CPA CFO trying to sort out serious accounting issues?

Does the name Erin Callan mean anything to you?

In retrospect, it is easy to see the error of her ways for taking the job and of Lehman’s management for appointing her. What public company, of the size and stature of Lehman, in trouble already, can afford to have a CFO who is not an accountant? Have we not seen what happens when a CFO has no interest or aptitude for GAAP? A seasoned CPA CFO – not Mr. Kowalewski – would have known that an auditor resignation over “controls” could lead to lots of questions. Auditor resignations also eventually lead to lots of litigation if there’s a sudden stock price drop that accompanies them.

Go here for the rest of the article.

5 replies
  1. mbi
    mbi says:

    The problem is not whether a CFO is a CPA or not, but their ability to understand the problem. I’ve seen CPA CFO’s use their experience to down play an accounting issue while a non-CFA will bent over backwards to get the accounting right. In the first case the CPA used his political ability and knowledge of the audit process to make the problem go away rather than face it. The non-CPA spent more time researching the accounting issue and working with his Internal Control Department to make sure he was doing the right thing. My conclusion is that it is more about the individual in every case rather than a piece of paper.

  2. Anonymous
    Anonymous says:

    @mbi – Well said. Leadership principles over leadership titles. Being a CPA is about being guided by an ethical framework that best serves the public, but it doesn’t make an individual automatically become holy. On a more personal level, it all comes down to the values, upbringing, and philosophies that influence the individual leader’s decisions.

Trackbacks & Pingbacks

  1. […] accountants – but not always. They may even have prior experience in a public accounting firm – but that’s not required. In some companies, they may even be temporary or contract staff, sometimes provided by a large […]

  2. […] Facebook’s CFO is not an accountant, not a CPA and has no public accounting experience. What’s wrong with that? It may be barely tolerable when a company is in startup mode, but this is a big global company that has to be run, run well, and run according to GAAP. […]

  3. […] Facebook’s CFO is not an accountant, not a CPA, and has no public accounting experience. What’s wrong with that? It may be barely tolerable when a company is in startup mode, but this is a big global company that has to be run, run well, and run according to GAAP. […]

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