The future of corporate reporting: from the top.

• Author: Heffes, Ellen M.
• Position: Financial Reporting - Interview

Edward E. Nusbaum, CEO and Executive Partner, U.S. Grant Thornton

Despite the recent accounting scandals and economic downturn, Edward E. Nusbaum is optimistic about the U.S. capital markets and the capitalistic system. He believes the accounting profession can improve itself, and he sees a day when there will be "plenty of public offerings and the public market system will flourish." Meanwhile, the CEO and executive partner of Grant Thornton U.S., the 5th largest accounting firm, believes that many companies -- after testing the waters and finding no benfits to being a public company -- will go private. Grant Thornton serves the middle market (companies with revenues between $25 million and $2 billion), with clients from both publicly and privately held firms. Nusbaum responded to questions posed by Financial Executive's Managing Editor, Ellen M. Heffes.

All that's come to light -- accounting scandals, Wall Street practices -- are being somehow connected and bringing the economy to a standstill. Is the current turmoil due to "real" problems or is it overblown?

EN: I think some real problems exist in financial reporting -- serious problems that have existed the last few years. While the vast majority (99 percent) of companies are probably preparing their financial statements accurately and fairly, the press tends to make it sound like every company is misstating its financial results. That's certainly not true, but clearly there are too many re-statements, and there is too much abuse. We are never going to eliminate financial fraud one hundred percent; it's naive to think that it'll go away after 2002 because we adopt some new legislation.

What we can do is improve financial reporting, the accounting standards and auditing standards. We can improve the accounting profession and the internal controls that exist within companies. It's up to everyone involved to take the necessary steps to fix the problems and in-sure that they don't re-occur. We can also im-prove what the other professionals do -- investment bankers, attorneys, commercial bankers -- so that the entire business community focuses on accurate and fair financial reporting.

What's the impact of the "changed" environment on your firm and its business practices?

EN: The changes have impacted us greatly. First, we quickly decided that Grant Thornton had to play a leadership role in helping fix the problems. Earlier this year, we recommended a five-point plan, and many of those points...