Episode 5 | Skepticism and the Financial Executive
Financial managers are the ones who prepare financial reports, and if there are material errors, they are held responsible. During the course of preparing quarterly and year-end financial statements, members of the finance team can find themselves on the receiving end of skepticism as they present financial reports and analysis to other management, the board, the external auditors and others. But financial executives also need to be exercising skepticism when it comes to the information flowing up to them through their organizations.
In dialogue with Marie Hollein, CEO of Financial Executives International, and Gary Kabureck, chief accounting officer of Xerox, series moderator Michele Hooper, an experienced audit committee chair, explores just how financial executives can exercise this vital skill. Drawing on the experience of FEI’s membership, Hollein reports that financial executives exercise skepticism every step of the way along the financial reporting process. Agreeing, Kabureck explains how at Xerox, building a skepticism-ready team begins with hiring the right people, including financial executives with experience in conducting major audits. The company has also alleviated time pressure, a major motive for fraud, through good time management. Certification requirements under Sections 302 and 906 of Sarbanes-Oxley help promote skepticism, he notes, because professionals won’t vouch for a report they don’t trust.
To be sure, “figures can lie, and liars can figure,” but there is a solution. Hooper and the panelists share best practices for implementing the COSO framework—with practical tips on fulfilling COSO’s five key areas of control environment, risk assessment, control activities, information/communication, and monitoring—not in “green eye shade” silos, but as part of a reliable reporting system.
Marie Hollein is CEO of Financial Executives International (FEI) and Financial Executives Research Foundation (FERF). Hollein was previously managing director of financial risk management for KPMG. Prior to joining KPMG in 2005, Hollein held senior financial executive management positions at Ruesch International, ABN Amro Bank, Citibank, and Westinghouse Electric. Her expansive involvement with professional associations also includes board and committee positions at organizations such as the Association for Financial Professionals, Journal of Treasury Management, International Finance and Treasury, Treasury Management Association, Executive Club of Chicago, and the National Education Committee.
Michele J. Hooper serves on the NACD board of directors and on the boards of PPG Industries, Inc. and UnitedHealth Group. She chairs the audit committee for PPG, and the Nominating and Governance committee for UnitedHealth Group. She is also co-chair of the CAQ Working Group focused for the Deterrence and Detection of Financial Reporting Fraud. Ms. Hooper previously was a board member of Target Corporation, AstraZeneca PLC, DaVita Corporation, and Seagram Company Ltd. She is President and CEO of The Directors’ Council, which specializes in corporate board of director recruitment.
Gary Kabureck is the chief accounting officer of Xerox. He was named to this position in 2001, and was appointed vice president of the corporation in 2003. He is past president of the Financial Executives International (FEI), Rochester, New York chapter. He currently is a member of the FEI’s National Committee on Corporate Reporting and is chairman of the FEI’s Financial Accounting Standards Board subcommittee. He is a frequent speaker on Sarbanes-Oxley compliance and numerous financial accounting, reporting, and governance topics.
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