Chief Financial Officer CFO in Most Corporations, Essay

Excerpt from Essay :

Chief Financial Officer (CFO) in most corporations, both public and private, has expanded exponentially in recent years (Favaro, 2001). Compliance requirements and increased dependence on accounting information has caused the role of the CFO to take on increased importance.

The role and responsibilities of the CFO vary from corporation to corporation and there is no hard and fast rule as to what the role and responsibilities of a CFO might be (Farag, 2011). Such roles and responsibilities can be extensive but there are essentially five major roles that nearly every CFO fills in the modern corporation. The first such role is to participate fully in the leadership of the corporation. In this role, the CFO, using his knowledge of accounting rules and principles, contributes to the overall corporate strategy and assists in formulating policy for the organization.

The second role filled by the CFO is to be actively involved in the corporation's business decisions. This would require that the CFO exercise his financial knowledge to assist the decision making team in making decisions and to do so with an eye toward not only the current status of the corporation but also long-range plans that the corporation might have. The CFO has the responsibility of being uniquely aware of the financial status of the corporation and he is, therefore, entrusted with using this knowledge prudently. He must be able to examine the rewards and risks involved in any corporate action and make informed recommendations based on these rewards and risks. Because CFOs, in most cases, report directly to the corporation's Chief Executive Officer (CEO), the relationship between the two individuals must be good one professionally. A break down between these two individuals can spell doom for the corporation and the CEO must be able to rely upon the financial judgment of the corporation's CFO.

The public reaction to incidents such as Enron has brought considerable pressure on the role of CFOs. The enactment of the Sarbanes-Oxley Bill by the U.S. Congress has placed additional compliance pressure on publicly traded corporations and enhanced the responsibilities of CFO (Zhang, 2007). The unethical financial practices exercised by a few corporations have forced corporate accounting departments to be more diligent in their accounting practices and CFOs are ultimately responsible for all corporate disclosures regarding its finances. In the end the CFO must take appropriate action to ensure that the corporation's money is properly protected at all times and that it is being properly used in the promotion of the corporation's purposes. Toward this end, the CFO must make sure that the members of the corporate decision making team are provided with the proper financial information available well in advance of the time necessary for making decisions. In the event that the decision making team has questions, the…

Sources Used in Document:

References

Farag, H. (2011). Evolving Capital Markets and the Changing Role of the CFO. In T.S. Environment, Ulrich Hommel (pp. 127-141). New York: Springer .

Favaro, P. (2001). Beyond bean counting: The CFO's expanding role. Strategy & Leadership, 4-8.

Zhang, I.X. (2007). Economic Consequences of the Sarbanes-Oxley Act of 2002. Journal of Accounting and Economics, 74-115.

Responsibilities of CFO

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