by Tom Hanlon
Illinois alum Cary McMillan, CEO of True Partners Consulting, an independent tax advisory firm, told accounting students at a recent lyceum, “When I went to school here, there was no ‘BIF.’ As bad as that name sounds, it’s a lot better than what was here when I was in school, which was a parking lot.”
McMillan laced his hour-long talk with humor (including acknowledging that he has had to tell people that no, True Partners is not a dating service), but throughout the session, he delivered an insider’s look at many key issues involving boards, CFOs, and auditors. He used anecdotes from his experience on both sides of the table to inform students of the relationships between boards and CFOs, and how CFOs and auditors can most successfully function in their roles.
The CFO’s Role
“As a board member, the number one person you want to be able to talk to is the CFO,” said McMillan, who sits on the board of directors for McDonald’s, American Eagle Outfitters, the Art Institute of Chicago, WTTW, and Millenium Park, among others. “The CFO needs to develop an independent relationship with the board. Not because he or she is going to be a tattletale on the CEO. There are some questions a board member might ask a CFO and the CEO and would like to get independent answers. If the CFO has spent time before and after the board meetings, maybe a lunch, maybe a phone call, something to talk to that board member maybe when nothing was really crucial, maybe that board member would feel good about calling that CFO [when something crucial did come up].”
McMillan talked about the board’s expectations of a firm’s finance function, using the CFO as a placeholder for that function.
“The CFO has to be the most transparent member of management,” he said. “You might think the most transparent member would be the CEO, but this isn’t the case. Usually the CEO wants something from the board – to approve a position, to approve a strategy, an expansion into China. And the boards are there to listen to what the CEO wants. But they gauge what he or she wants against the financial reality of the company.”
CFOs, he said, need to be able to translate financial information into something that’s understandable to people who don’t work for the firm. He also made these points about CFOs:
The Auditor’s Role
- CFOs have to own and deliver 100 percent on the compliance of all the rules and regulations; they have to own them all. (“No board member cares what the CFO thinks about the rules. They care to hear that you are complying with them 100 percent.”)
- CFOs don’t need to know everything. They just need to know what’s critical. (“Nobody expects the CFO to know the answer to every question. Many of the questions are not financial in the first place. The CFO does need to get an understanding of the business, though.”)
- CFOs need to cut to the chase and be clear. (“CFOs need to be articulate, short-winded, and clear. Too many CFOs pride themselves on using words other people using the English language have never heard of, pride themselves on being right. Articulation is an art, not a skill, and really needs to be dealt with.”)
McMillan also clarified the role of external accountants – auditors – in working with a firm. “External auditors report to the board, not management,” he said. “They serve the board. In the end, their work, their reports, are not just relied upon by the board or by management, but most importantly by the shareholders and the company and lenders.”
He told the students that to be a successful auditor, you have to give companies added value. “Tell them something they don’t know,” he said. “You’ve got that privilege as an auditor to talk to virtually anyone in the company, any of their customers, any of their suppliers. You talk even sometimes to their competitors to figure out how this company is doing.
“You need to tell them they have people issues, they have process issues, they have competitive issues; you need to add value. An accountant who is being trained to test internal controls and renew accounting policies, that sometimes gets forgotten.”
McMillan recounted a time when, as an auditor, he went to the CEO of one of his clients to tell him something the CEO didn’t want to hear. “I told the CEO what he was going to say the next day to the board was a bad idea and it was going to hurt his reputation,” McMillan recalled. Then he braced for the CEO, who was much older and quite intimidating, to blast him. Instead, he was grateful to McMillan.
“Why did I take that risk? I’ll tell you why,” he said. “Because what they wanted to do was stupid, but they thought the accounting would justify the stupidity. Sometimes people do stupid things because it’s good for accounting. But in the end, every stupid thing that you do remains stupid. So I killed the deal.”
As with CFOs, a board expects auditors to get to the point and focus on the facts, and to bring up problems in a timely fashion. “If the first time you bring up a problem is at the auditing meeting, it’s probably your last meeting,” he said.
For students considering the auditing profession, McMillan said you can make a lot of money, but the jobs are hard. Changing auditors every five years means you’re more likely to be in a position of needing to move, and it’s harder to give the added value he spoke of because of the current system, where “Today the lead audit partner is the person who gathers the information from the client and sends it to the New York or New Jersey technical offices and waits for someone who doesn’t know the client to give them the answer.”
In addition, there is more involvement through the government and the PCAOB, and documentation is at a premium. Finally, there are international challenges to the US accounting model, and it remains to be seen what will happen to that model.A Successful Career
What, then, do students need to do to be successful in the auditing profession? “You need the technical skills, of course. But beyond that, you need the interpersonal skills, a strong work ethic, and you have to own your own clients,” McMillan advised. “I call it job ownership. Whether you’re the youngest or the lowest ranking person on assignment, or the senior person, everybody is worried about the client all the time.”
As for corporate accounting, he warned that you need a high attention to detail, and you have to be comfortable with the process, with technology, and with tight deadlines.
“You also need flexibility,” he added. “In the corporate world, the people who are the most flexible – when an opportunity comes up – they take it. The opportunity might be in Muncie, Indiana, or Pakistan, or Champaign, Illinois, or it might be someplace else. If you pass on it, it might not come up again. So flexibility, especially on the corporate side, is important, because there’s a lot of turnover, and thus there are a lot of opportunities out there.”