vol. XV no. 2

				How Jim Copeland Copes with Change at Deloitte & Touche   continued... Copeland calls for the creation of an organization similar to the National Transportation Safety Board to investigate the causes of business failures. Copeland believes the NTSB and the process it follows help restore public confidence. "After an airline disaster, for example, the NTSB conducts an exhaustive independent investigation to piece together the events that led to catastrophe. From its analysis, the NTSB recommends changes in policies and procedures to help prevent another disaster from happening for the same reasons. "Using this example, President Bush could create, perhaps by executive order, a similar board to investigate business and financial failures," said Copeland, who suggests the board's membership could include representatives of the Securities and Exchange Commission, Comptroller of the Currency, Federal Reserve and other appropriate federal regulatory agencies. Copeland also lashes out at what he considers bad ideas for reform, including the notion to further limit the scope of services that audit firms can provide to their audit clients. Some people even propose that no other services be provided by a company's audit firm. "I believe this is a terrible idea," Copeland declared. "It would diminish the quality of auditing, rather than improve it. Increasing limitations on our scope of services may make the public believe that audit teams are more independent ­ but, in fact, it will make them less competent. To provide the highest-quality audits of large, complex organizations, you must create teams of independent professionals with diverse and highly specialized competencies." A competent audit for a company like Enron would have to include not only accountants and auditors, but also experts in trading controls, tax, actuarial science and information technology. "And these experts do not, and generally will not, reside exclusively within an audit practice. We could not retain the diverse technical experts we need if we asked them to do nothing but audit support work. And even if they agreed to, they'd soon lose their state-of-the-art skills." Another recommendation Copeland opposes is mandatory rotating of auditing firms. He believes it would result in the destruction of vast stores of institutional knowledge and guarantee that auditors would be continuously climbing a steep learning curve. A better idea, he said, would be for the SEC to automatically review companies that change auditors to be sure they are not doing so to escape a diligent audit. Copeland remarked that every profession in the financial system needs change. "The truth is we all need to be engaged in serious self-examination and reflection, because we've all failed in our own way to adequately protect the public interest. So we can't be satisfied with the status quo." Copeland also says self-regulation within his profession needs to change. He calls for creation of a new body, dominated by people from outside the accounting profession, that would be empowered to oversee the accounting profession, perform quality reviews of the practices of public auditors and discipline auditors and their firms when appropriate. The quality reviews would replace the current peer review process, and disciplinary actions would be reported to the public. Another constructive reform he recommends is rotation of individual audit team members. The SEC already requires rotation of the lead audit partner on every public company audit team at least once every seven years. Deloitte & Touche is considering rotation requirements for client service personnel below the partner level. He noted that "the public will not tolerate frauds and other criminal activities" and that Deloitte & Touche is adding forensic auditing resources. The firm commissioned a survey of 800 voters by Peter D. Hart Research Associates that found 87 percent agreed "that we need to establish criminal penalties for those who knowingly provide false information to an auditor ­ or for auditors who knowingly look the other way. I agree. They both should be in jail." Ultimately, when all of the systems, controls and regulations are in place, success or failure will boil down to one thing ­ personal integrity or the lack of it, Copeland explained. Even the best of reforms serve only to "help encourage an honest professional to stay honest. All of our reforms are only as real as our determination to try to do the right thing ­ individually ­ every time, day in and day out." Copeland, who was elected by his fellow partners to a four-year term as CEO in 1999, said that regardless of the current turmoil in public accounting, it remains an attractive profession. "The judgment I made 35 years ago was that accounting was a great foundation for understanding business, getting a good general education in terms of how businesses work and understanding business at a detailed level. And I would say that hasn't changed. Accounting is still the way business explains what it does and what it has done to the marketplace. It is still a wonderful foundational preparation for getting into business." There is one thing about accounting that Copeland hopes does not change. "Throughout my career, every time I started to think about needing a new job, the firm would give me a new job. I changed jobs regularly, but all within the same business, the same firm. That is an appealing part of the profession and one that I certainly hope doesn't change." See Jim Copeland's recommendations for reform. Top | Back

Copyright © 2003 Robinson College of Business/Georgia State University.