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Bad financial advice proves no excuse for centro

Managing Director for the CFO Centre Stephen Copplin said a recent Federal Court case involving troubled property group Centro has highlighted the importance of having in place an experienced Chief Financial Officer.

In a landmark decision, the Federal Court has found that executives and directors of Centro breached the Corporations Act by signing off on financial reports that failed to disclose billions of dollars of short-term debt.

Handing down his decision, Justice John Middleton said the directors failed to apply their minds to the financial statements, otherwise they would have picked up the errors.

There was no suggestion that the directors were being dishonest, but rather that they relied upon extensive advice and processes “that were not called into question”.

Mr Copplin said the decision was likely to have repercussions for company directors around the country, potentially increasing their responsibility to scrutinise accounts as part of their due care and diligence.

“The case proves poor financial advice doesn’t offer any protection in court,” Mr Copplin said.

“Having a qualified CFO on your team to mitigates risk.

“This isn’t just important for large ASX-listed companies, but also applies to small businesses.

“While small businesses have different reporting requirements they still need to know the state of their accounts.

“It’s essential that financial information supplied to bankers and other associates is not misleading.”

Mr Copplin said another benefit of having a CFO on your team, whether part-time or full-time, meant that the financial state of your company would be significantly healthier than if you were flying blind.

“Despite the Global Financial Crisis, our clients’ businesses are growing,” he said.

“That’s because they are able to focus on what they do best while we ensure their financial management systems are performing at optimum levels.”