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CFOs pushed to defend numbers in post#x2013;Enron; era

Knight Ridder Newspapers

Corporate America is taking a hard look at the recruitment and oversight of chief financial officers since the collapse of Enron Corp. was linked to the man who steered its accounting practices.

In a report commissioned by Enron's board of directors, Andrew Fastow is portrayed as a CFO who put his own interests above those of the corporation.

When the situation was exposed, it triggered a chain of events that caused the nation's seventh-largest company to file the largest bankruptcy case in U.S. history.

With this chilling picture in mind, corporate boards and other influential stakeholders are peppering CFOs with an increasing number of questions about financial transactions and closely examining their answers.

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"They are going to come under increased scrutiny from boards and audit committees," said Philip Livingston, chief executive and president of Financial Executives International, a professional association based in Morristown, N.J. "Boards and CEOs are a lot less worried about strategy and more about control."

William Larson, CFO of Dallas-based Commercial Metals Co., said the message is clear: "If they are not as expansive in their presentations to boards, they are going to have to be now."

Ironically, the CFO's inquisitor might well be another CFO.

Enron's debacle is accelerating the demand for financial gurus to serve on the audit committees of corporate boards as companies vie for individuals who understand accounting intricacies beyond the basic balance sheet, according to several executive search firms.

CFOs have traditionally held a pivotal position in corporate America. Their power stems from their control of funds, their role in determining the cost of business moves and the importance of their revenue and income forecasts.

In recent years, as downsizing has eliminated the jobs of many chief operating officers, a number of CFOs have also taken on the task of formulating corporate strategy and direction.

Many now regularly stand in for chief executives or accompany them during conferences and presentations with Wall Street analysts, fund managers and investors.

Enron will spur company directors to get involved more deeply in the oversight and selection of CFOs, said James Westphal, a professor of management in Austin.

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