CFO does not stand for Chief Financial Officer but Chief Fiddling Officer. The title has nothing to do with musical accountants. It relates more to cooking, as in cooking the books! According to The Economist, they ‘manage’ earnings in the financial statements. [1]
Managing earnings is not the same as cheating or cooking the books. The temptation for accountants to adjust the numbers, according to The Economist, is great, because of published targets and their remuneration connected to them.
Is it true that CFOs manage earnings? Many people believe that accounting is a science, so by definition earnings or even financial statements as a whole are either right or wrong, and if they are wrong, it is either because a mistake has been made or because someone is fiddling the books. This someone is the CFO.
Accountants, I think, tend to promote the myth that the reported earnings number they have calculated is a scientific calculation set in stone. Accountants make accounting complicated, so the science could be true, but any CFO will tell you that large doses of judgement and estimating go into calculating earnings, whatever the size of the company.
The three levels then, are fiddling, managing and estimating when calculating earnings. Estimating is not fiddling, though some believe fiddling is more than managing. Most of us estimate the numbers and move on.
[1] The Economist, The Changing Chief Financial Officer, 4th July 2002, https://www.economist.com/unknown/2002/07/04/the-changing-chief-financial-officer. Now I realise this is an ancient source, more than 20 years old, but it is so original, I had to bring it back to life. CFOs today continue to ‘manage’ earnings in the financial statements, as they have always done and will always do.
