The Debate: Accountancy qualifications

Experience over certificates

By Derek Brownlee

On the face of it, it seems obvious – how on earth could someone be able to act as CFO or FD if they do not even hold an accountancy qualification?

The reality, of course, is quite different. Just as being a qualified accountant doesn’t automatically provide the skills to act as a CFO, lacking an accountancy qualification should not be a bar. The critical factor is experience – and the nature and expertise of the team the CFO leads.

It would be an unnecessary restriction to confine the role of CFO to qualified accountants alone. Competition is healthy – boards should be able to appoint an MBA to the role of CFO in place of a CA if they are better qualified to do the job. Indeed, if a board considers MBAs to be better qualified than a CA should that not make our institutes reflect on the nature and quality of the accounting syllabus?

It has been argued that the lack of disciplinary avenues for non-accountants is a good reason to favour members of one of the accounting bodies – but this misses the point. Whilst the institutes do have the power to discipline members, these are used rarely and in practice a more potent fear, even for qualified accountants, is the risk of losing employment.

Is it really plausible that a CFO who is not a qualified accountant, revealed to have acted in such a way as would have made a CA subject to disciplinary action, would simply walk into another role with no questions asked? Not in the business world, where news travels fast – and not in any organisation with a half decent recruitment vetting function.

It’s tempting to think that more regulation is the answer. It isn’t.

Far better for the professional institutes to raise their game, ensuring their members are better trained, operate to the highest ethical standards and are properly scrutinised by a genuinely independent audit function, than to rely on restrictive practices.

• Derek Brownlee is a chartered accountant and member of the policy unit at the Institute of Directors.

Qualifications countBy Peter Wyman

One of the interesting facts arising from WorldCom, Enron et al, is that – apart from the auditors – none of the people held responsible for the companies’ financial reporting was a qualified accountant.

It would be going far too far to claim that, had the CFOs of these companies been qualified, the scandals would all have been avoided. However, this does not mean that we should not give serious consideration to whether the quality of financial reporting would be improved if a qualified accountant were responsible.

A formal accountancy qualification provides knowledge of accounting standards and other matters relevant to financial reporting. Those who work their way up the corporate ladder develop and enhance this knowledge and skill through their experience.

Managers parachuted into senior financial roles from other disciplines will almost certainly not have, and not be able to acquire, this knowledge in sufficient depth.

Secondly, and arguably more importantly, a formal accountancy qualification provides students with a proper appreciation of the ethical issues involved in their work. In the case of the ICAEW and some others, this is reinforced by the requirement to train in an authorised environment. SMEs, and some larger companies, rely heavily on their auditors for advice and guidance.

In these cases, even if the FD is not qualified, significant reliance is placed on those who are. In the very largest companies much greater reliance is placed on the company’s own finance team and I believe it is here the importance of qualified accountants is greatest.

The diverse nature of a modern CFO’s responsibilities, ranging from corporate strategy to investor relations, means that frequently the CFO will not be personally involved in the preparation of the accounts or in arriving at the difficult accounting judgements. What is important is the person who makes these judgements and the person who is the key interface with the company’s audit committee, is a qualified accountant.

It is for this reason that ICAEW recommends that a director or senior executive should be nominated as the ‘principal accounting officer’ and be a qualified accountant.

• Peter Wyman is ICAEW president.