The future of corporate reporting: from the top.

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

James E. Copeland Jr., retiring in May and ending his 36-year career, is deeply concerned about the accounting environment and the tarring his profession has received for the wrongs of a few. In an interview with Financial Executive's Managing Editor Ellen M. Heffes, he discusses the state of corporate reporting and the unintended consequences of new legislation that he says is "on-point" yet focused on fixing the wrong problems. William G. Parett will become the firm's Global CEO on June 1.

EH: While the immediate urgency of the U.S. accounting/corporate reporting scandals has abated some, from your perspective, are there real problems with the U.S. system?

JC: It's a good news/bad news situation. The bad news is we've been through a terrible period of time. A lot of people have suffered, reputations of many people have been damaged -- some who deserved it, and some who didn't -- and there have been massive losses in the markets. People have suffered, and people lost their jobs.

The notion of efficient market hypothesis, that historical financial statements really don't matter, had sort of taken hold and had gotten a lot of traction. People, basically, were treating the audit as if it did not matter, and the historical audited financial statements as if they did not matter. That was a serious mistake, and we have paid for it.

The good news is that we are entering a period that will probably be a high watermark for financial reporting in terms of the integrity and the accuracy of it, because everyone is focused on this issue now.

That really needed to happen. I'm hopeful that the light at the end of the tunnel is not a train, and that we will see the best financial reporting that we've seen, at least during my career.

EH: Discuss the environment going forward, and some of the remedies in place -- like Sarbanes-Oxley -- and others that might follow.

JC: I think the forces for good are already in motion, as everybody is paying much more attention to the quality of financial reporting now -- boards of directors, audit committees, management, the auditing profession, analysts, investment bankers -- and this should give us a good result.

The unfortunate part is some of the unintended consequences that evolved in the form of "reforms" are also in place. Some of those consequences will be realized over the next several years, and they won't all be good.

I'm concerned going forward that we are focused on the wrong issues. Everybody believes that...