Markets regulator Sebi on Friday urged Chief Financial Officers (CFOs) to reduce the time lag between the announcement of financial results and the publication of full annual reports, which is aimed at enhancing investors’ confidence. Additionally, CFOs have been encouraged to enhance their engagement with audit committees and auditors, ensuring more collaborative and accountable financial disclosures, Sebi whole-time member Ananth Narayan said on Friday.
Apart from highlighting the vital role CFOs play in upholding public trust, Narayan spoke about recent trends in capital formation, the opportunities and risks ahead and the importance of co-creating effective regulations to foster sustained capital growth. “Currently, the gap between annual results and full annual reports ranges between 70-140 days. The full report with notes to accounts, internal controls report, audit key matters and CARO (Companies Auditor’s Report Order) disclosures is vastly more informative. Shortening this gap would significantly enhance transparency for investors,” he added.
Speaking at the ETCFO NextGen 2025 event, he stressed the need for CFOs to facilitate audit committees and auditors in shaping the audit plan for the year and suggested that auditors should participate in audit committee meetings beyond just discussing their specific items. This, he further said, would help boost trust and open more channels of communication among stakeholders. According to Narayan, the role of the CFO has evolved dramatically from being a record-keeper to becoming a forward-looking value architect.
“When you (CFO) sign off on financial statements, it's not a routine formality. It's a solemn promise that what's presented is a true and fair view of the enterprise's financial health. That promise is the bedrock of capital markets. If that trust is broken, the damage can be immense,” he added. He stressed that CFOs must go beyond mere compliance with accounting standards and embrace their underlying principles, not just the letter, but the spirit of the law.
At the same time, he emphasised the importance of safeguarding investor trust. He cautioned against Type I errors, such as governance failures, tech breakdowns, fraud, and manipulation that can severely damage this trust. Equally, he warned of Type II errors, where excessive regulation might stifle innovation and growth. As AI, automation, and energy-related technological shifts accelerate, nurturing business creation becomes more vital than ever. He also cautioned against the pitfalls of over-regulation, which could lead to Type II errors and hamper genuine capital formation.
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