CFOs and the Board of Directors: Is finance doing all it can to improve oversight?

Intensified regulatory scrutiny requires new channels of communication among an organization'sdecision-makers. Here's how finance can help directors keep the company out of trouble.

Corporate directors have assumed greater liability, responsibility and influence in the post-Sarbanes-Oxley world, and their changing role is affecting their relationships with CFOs. Finance executives now must dedicate more time and effort to educating directors about corporate risks and financial reporting challenges. Many organizations are finding that the success of the board-CFO dynamic in today's regulatory environment depends on an increase in both the quantity and the quality of communication.

When he discusses his relationship with his board, William Keitel, executive vice president and CFO of San Diego-based Qualcomm Inc., underlines the importance of coordination of information among the company's directors, legal counsel, auditors and management. Qualcomm generates a quarterly accounting disclosure list, which executives and directors call the "QAD," to keep lines of communication open. Each quarter's QAD contains items that Qualcomm's leadership has identified as deserving of special consideration in terms of accounting decisions or in light of upcoming SEC filings. The list first appears midquarter, when the finance team distributes a draft to Keitel and Qualcomm's external auditor, directors, CEO and external legal counsel, all of whom supplement it as they see fit. "When the audit committee reports to the board, more often than not they have that list in front of them," notes Keitel.

Although Qualcomm's senior management has used QADs for years, one category on the list -- potentially complex transactions -- is relatively new. That category includes any potential transaction that may involve account-ing techniques that most people who are not accountants would need help understanding. The buying or selling of a business or a major asset, for example, might qual-ify as a potentially complex transaction. Bringing these deals to the attention of the board and management team helps ensure that the company dedicates sufficient time and resources to determining the appropriate accounting treatment and that directors understand the reasoning behind reporting decisions.

Keitel says Qualcomm's overall response to the Sarbanes-Oxley Act represents less of a major overhaul than a fine-tuning and an acceleration of movement toward objectives the company already had in place before the law's implementation.