The Value of the Corporate CPA in Corporate Governance
Adopting the corporate structure for a business brings on a long list of new concerns and reporting requirements that make the corporate CPA function critical to corporate governance. Now, instead of one or a few owners, there is a group of shareholders, sometimes a great many of them. Often a corporate board of directors has more people on it than many small business partnerships or LLCs have for owners.
The corporate CPA becomes crucial to compliance with laws and procedures required for reporting to shareholders and government compliance enforcement. Four primary areas of corporate CPA involvement iand influence are:
- Planning – Corporations make decisions regularly that impact financial results and shareholder confidence. These decisions involve operations, management, shareholder relations, and investment. Only thorough and accurate accounting practices can assure that decisions made are in the best interests of the corporation and the shareholders. Especially when a board of directors with multiple points of view is involved, the corporate CPA function can distill information in a way that can bring them together for beneficial decisions.
- Public Accountability – The corporation is a legal entity, and as such has responsibilities to the public for responsible behavior and compliance with things like paying taxes. Particularly with the payment of taxes, the corporate CPA helps to assure that obligations are met while minimizing taxes legally. Public accountability is important in maintaining the corporate image and precluding actions that could damage the corporate reputation.
- Shareholder Accountability – Shareholders are owners, and for that reason alone there is a critical need to be accountable and accurately report corporate financials. Profitability and shareholder prosperity are important, but shareholder confidence is just as important. Damage to either can result in dramatic devaluation of the company’s stock. Shareholder voting is how their voices are heard and the corporate CPA function must contribute to shareholder confidence in the information they receive.
- Cash Flow Management – Accountants work with numbers, and nowhere are numbers more important than in management of the cash flow of a business. The accounting function helps management and the board of directors to operate the business in a way that keeps cash flow in line with current and future needs.
Those are the four primary areas of involvement of the corporate CPA function, but there is another area of importance depending on the type and size of the corporation.
The role of the corporate CPA in compliance committees – Depending on the business’ activities, there can be multiple areas of compliance to government safety and other laws and regulations. These can be local, regional, or national, but all will be important to the sustainability of the corporation. The CPA’s role iiincludes helping with the design and operation of compliance oversight.
It is the experience in accounting principles that makes the CPA valuable in compliance oversight. Their expertise in control systems and in the methodology of audits is useful in designing those systems and audits for compliance oversight.
Never underestimate the value of the corporate CPA in the health of a corporation.
ii The Role of the CPA in Corporate Compliance Committees – CPAJournal.com