The future of corporate reporting: from the top.

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

James S. Turley, Chairman and Chief Executive Officer, Ernst & Young LLP

Fresh out of college, in the late 1970s, James S. Turley began his career with Ernst & Young's audit staff in Houston, serving clients in the energy sector. The advent of energy trading, he says, has significantly changed the business from the traditional exploration, production, refining and marketing businesses that he was familiar with in his early days. Having grown his entire career with the firm in a variety of audit positions, Turley's extensive experience eventually led to his being named Chairman in July 2001.

A self-proclaimed "optimist by nature," Turley says that personal quality has been a helpful asset, especially recently. He believes the current financial reporting issues to be a global phenomenon, and following what has been a difficult and tragic year -- for not just the capital markets or the accounting profession, but for all of Corporate America and the world -- that things will improve.

Also, in an interview with Financial Executive's Managing Editor, Ellen M. Heffes, Turley said he believes that the increased focus on all sectors of financial reporting and performance is very positive for the future and has, in fact, "reinvigorated the relevance of our profession."

Down the road now from the recent wave of corporate accounting scandals, what are the "real" issues, and what problems do you see?

JT: As I look back to the ending of, if you will, a 10-year bubble of dramatic increases and enhancements in earnings and stock prices -- what [Federal Reserve Chairman Alan] Greenspan talked about as "irrational exuberance" -- I think there was an element of the environment creating, in investors and companies, a suspension of disbelief in some ways. Looking back in history, after long bubbles, there are problems. [Also] fees were dramatically exaggerated by individual greed on the part of some, [and] by some egregious behaviors. And, I think our profession could have done, and should do, a better job of warning earlier. So, there are real issues.

The biggest problem today is the loss of confidence, in not just our profession, but in financial management, executive management, audit committees and boards. [While] I see no silver bullets to turn that around, I think it is going to be turned around by sustained, outstanding performance, high quality [and] high integrity by all the parties -- management, audit committees, audit firms.

What impact is the "changed" environment having on your firm and your business practices, and are you now doing anything differently?

JT: There are a lot of differences, and I'll discuss some of them. One is that because of the tragic loss of one of the "Big Five," our firm is very different than it was a year ago. It's 25,000 people stronger and over $2 billion stronger around the world. And, in more than 55 of the over 80 countries that were Andersen operations, the partners elected to join Ernst & Young. Understand that these are not combinations or acquisitions -- we're not writing checks to them. The partners made choices, like clients make choices. They chose Ernst & Young, they tell me, because of our commitment to the core businesses, so important to markets today; our real sense of teaming as partners; our deep commitment to quality; and our commitment to people.

So the firm has changed. As...