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Monday 5 January 2009
Concerns Over CFOs Quitting
For some firms, the role of the CFO may have evolved over the years so that this staff member is more of a strategic planner or investor-relations chief.
Companies’ year-end closing of books may suffer if chief financial officers go in this period
By Yang Huiwen 5 January 2009
The spate of chief financial officer (CFO) departures during the year-end period has raised concerns about how companies will crunch the numbers for the auditing process.
Last Wednesday alone, five firms announced the effective departure of their respective CFOs. They included Multistar Holdings, Rotary Engineering and Eagle Brand Holdings, which had their financial years ending on Dec 31.
Avi-Tech Electronics, whose financial year does not end on Dec 31, also lost its CFO, while Food Junction Holdings’ CFO stepped down from the post but remains on the board as an executive director.
Two other companies - Koh Brothers and KS Energy - saw their CFOs depart in the past two weeks.
As most firms typically end their financial year on Dec 31, there are concerns that if CFOs leave in the last few weeks of the year, the quality of a company’s financial reporting may suffer, especially if there has been no succession planning, say industry observers.
‘That doesn’t go down well for the company with the year-end closing of books coming up in preparation for the auditors to step in,’ said Mr. Ernest Kan, the vice-president of the Institute of Certified Public Accountants of Singapore.
‘The accounting process will feel the impact with the departure of the CFO at such a time.’
The final number-crunch by external auditors typically occurs over the first three weeks of this month and may take several weeks to complete.
CFOs are responsible for the finances of a company, including presenting accurate financial information and overseeing its financial condition and capital structure.
The role has become increasingly onerous, with listed firms facing more detailed accounting practices and tougher standards of disclosure.
‘Departures are disruptive to book closure,’ said Mr. Richard Loi, partner of assurance and advisory services at Deloitte Singapore. ‘CFOs look after the financial reporting process and if they are not around or someone else takes over, the process is not as smooth as they will not be so familiar with the accounts.’
Mr. Pan Zaixian, manager of financial services at Robert Walters, agreed: ‘Investors and auditors are typically sensitive to CFOs departing before the year-end results have been finalised.
‘Conventional thinking dictates that a company’s management will normally prefer the CFO to see through the financial year.’
He added that the annual general meeting is the ideal time to announce a change of CFO.
While there are any number of reasons why a CFO will quit, one going near the end of the financial year and before the books are closed can spark talk of a disagreement over the interpretation and treatment of accounts, said Mr. Pan.
To quell such speculation, companies may state the reasons for their CFO’s departure, even though such disclosure is not required under rules governing listed companies.
In the latest bout of CFO departures, the companies involved gave various reasons for their resignations. Some were leaving to do their own thing, as in the case of Multistar’s Ong Beng Teck, who wants ‘to pursue his personal business interests’. Others were ‘looking at other career opportunities’.
Some companies may be less affected by their CFO leaving at the critical year-end juncture.
For some firms, the role of the CFO may have evolved over the years so that this staff member is more of a strategic planner or investor-relations chief.
Also, in larger companies, there is usually another accountant, normally the financial controller, who is responsible for doing most of the detailed work on the numbers. In this case, there could be less disruption to the auditing process if the CFO were to leave, said Mr. Kan.
Rotary Engineering, for example, appointed Mr. Cheong Yew Meng, who is currently the group financial controller, to oversee the finances for the time being after its CFO, Mr. Alex Goh, tendered his resignation.
Looking ahead, Mr. Kan said he expects a lower attrition rate among CFOs this year as the economic slowdown creates fewer opportunities to jump ship.
1 comment:
Concerns Over CFOs Quitting
Companies’ year-end closing of books may suffer if chief financial officers go in this period
By Yang Huiwen
5 January 2009
The spate of chief financial officer (CFO) departures during the year-end period has raised concerns about how companies will crunch the numbers for the auditing process.
Last Wednesday alone, five firms announced the effective departure of their respective CFOs. They included Multistar Holdings, Rotary Engineering and Eagle Brand Holdings, which had their financial years ending on Dec 31.
Avi-Tech Electronics, whose financial year does not end on Dec 31, also lost its CFO, while Food Junction Holdings’ CFO stepped down from the post but remains on the board as an executive director.
Two other companies - Koh Brothers and KS Energy - saw their CFOs depart in the past two weeks.
As most firms typically end their financial year on Dec 31, there are concerns that if CFOs leave in the last few weeks of the year, the quality of a company’s financial reporting may suffer, especially if there has been no succession planning, say industry observers.
‘That doesn’t go down well for the company with the year-end closing of books coming up in preparation for the auditors to step in,’ said Mr. Ernest Kan, the vice-president of the Institute of Certified Public Accountants of Singapore.
‘The accounting process will feel the impact with the departure of the CFO at such a time.’
The final number-crunch by external auditors typically occurs over the first three weeks of this month and may take several weeks to complete.
CFOs are responsible for the finances of a company, including presenting accurate financial information and overseeing its financial condition and capital structure.
The role has become increasingly onerous, with listed firms facing more detailed accounting practices and tougher standards of disclosure.
‘Departures are disruptive to book closure,’ said Mr. Richard Loi, partner of assurance and advisory services at Deloitte Singapore. ‘CFOs look after the financial reporting process and if they are not around or someone else takes over, the process is not as smooth as they will not be so familiar with the accounts.’
Mr. Pan Zaixian, manager of financial services at Robert Walters, agreed: ‘Investors and auditors are typically sensitive to CFOs departing before the year-end results have been finalised.
‘Conventional thinking dictates that a company’s management will normally prefer the CFO to see through the financial year.’
He added that the annual general meeting is the ideal time to announce a change of CFO.
While there are any number of reasons why a CFO will quit, one going near the end of the financial year and before the books are closed can spark talk of a disagreement over the interpretation and treatment of accounts, said Mr. Pan.
To quell such speculation, companies may state the reasons for their CFO’s departure, even though such disclosure is not required under rules governing listed companies.
In the latest bout of CFO departures, the companies involved gave various reasons for their resignations. Some were leaving to do their own thing, as in the case of Multistar’s Ong Beng Teck, who wants ‘to pursue his personal business interests’. Others were ‘looking at other career opportunities’.
Some companies may be less affected by their CFO leaving at the critical year-end juncture.
For some firms, the role of the CFO may have evolved over the years so that this staff member is more of a strategic planner or investor-relations chief.
Also, in larger companies, there is usually another accountant, normally the financial controller, who is responsible for doing most of the detailed work on the numbers. In this case, there could be less disruption to the auditing process if the CFO were to leave, said Mr. Kan.
Rotary Engineering, for example, appointed Mr. Cheong Yew Meng, who is currently the group financial controller, to oversee the finances for the time being after its CFO, Mr. Alex Goh, tendered his resignation.
Looking ahead, Mr. Kan said he expects a lower attrition rate among CFOs this year as the economic slowdown creates fewer opportunities to jump ship.
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