Sunday, June 22, 2014

CAE : The CFO could be your best friend or worst enemy ,you decide !

Although I discourage any reporting by the CAE to the CFO,  be it administrative or functional, I strongly encourage a close healthy professional relationship between both parties . Having said that, I am not suggesting that the CAE compromises his/her independence in any form or shape.

The CFO could be the best friend and strong supporter of internal audit or its worst enemy.This ,in my opinion is very much influenced by the actions of the CAE. This statement does not come from the vacuum ,but from my observations over the years as an independent consultant .

Here is the argument : 

- The CFO is the second most influential person after the CEO ( and in some cases, the first) and an important decision maker within the organization.
- The CFO is the owner of many business processes and risks .
- The CFO possesses a wealth of information about the business and the organization's strategic objectives.
- The CFO can significantly influence how internal audit is perceived in the organization .

The big question is : How can the CAE achieve this ?

- First perquisite is that the CAE possesses the personality and the mind set of a leader ! He/she should  act and deal with the CFO and other management members as an equal partner and earn their respect!
- The CAE should convince the CFO that he/she can actually add value and act as a trusted adviser.Actions speak  louder than words,so this has to be proven in practice !
- Needless to say that the CAE should possess top technical and soft skills to enable him /her to play the above mentioned role .
- I am a fan of direct and candid discussions .The CAE should arrange to meet with the CFO regularly to discuss a whole host of topics including what is going on within the organization, management's plans and directions,regulatory issue ,accounting issues, internal audit trends and updates and above all risks an risk management issues.

In my long consulting career,I have seen CAE's who try to ignore the CFO or submit to him/her .Both approaches do not work .There is no substitute to a healthy relationship based on mutual respect.

Please share your experience with your CFO !  

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