Thanks for inviting me to speak with you today. It's a privilege to be here on behalf of Deloitte & Touche and the nearly 30,000 people in the United States who make my firm a rewarding place to work -- and which I am proud to lead.

I'd like to extend my appreciation to the National Press Club and to the New America Foundation for this special opportunity. These two influential institutions bring both substance and coherence to the national debate on many critical issues, including questions of regulation and reform -- issues that now dominate the debate in my profession.

Since its inception, the New America Foundation has promoted fresh and innovative thinking about business that leads to a robust public debate on a spectrum of issues. We all need that. I appreciate the contributions you make through your publications, conferences, and public events such as today's discussion. Although the New American Foundation is just four years old, you're already making a very positive impact on public discourse, in Washington and across the country. I'm genuinely honored to share my thoughts with you today.

As both a profession and an integral part of the American business community and capital market system, accounting has come through a challenging period. Stop for a moment and think of the professional services marketplace two years ago:

The point of this summary is to remember how quickly this crisis has arisen, and the impact that it had in such a short period of time. We continue to see frequent reminders of how the actions of executives at Enron, Andersen and other businesses severely wounded investor confidence and tarnished the collective reputations of our profession and the business community. Once again we're reminded that building credibility and a strong reputation takes much longer than losing them -- especially in today's world of around-the-clock media attention.

Because of the actions of some business leaders, many people lost substantial amounts of their 401 (k) and retirement plans. They also lost something that can't be calculated--their confidence in financial reporting and the institutions involved in it. The full impact of those losses is hard to estimate. It's much harder to overcome.

Appropriately, I was first invited to speak here about reform in the business community on the day that the Sarbanes-Oxley Act of 2002 had been law for one year. And it's still in the news.

Throughout July and August, you couldn't pick up the business section of a major newspaper or watch cable news without reading or hearing stories about Sarbanes-Oxley, one year later. The debate was very active, even predictable: Is Sarbanes-Oxley working? Are the reforms real, or simply a large expense for American corporations? What kind of impact is the act having, or is it too soon to tell? Did it go far enough?

I'm here to tell you that Sarbanes-Oxley is working. Audit committees are more involved. They are meeting more often. Audit committees have deepened their understanding of the financial reporting process and accounting policies. They now ask more probing questions of management and auditors.

The law has enhanced transparency and reduced the risk of corporate fraud. In addition, it has changed the way in which CEOs view their responsibility for financial reporting. It has changed how CFO's relate to and interact with operating management on financial reporting and disclosure. It's changed the audit relationship with our clients. Our relationship has shifted away from one centered on the CEO and CFO, and toward the Audit Committee.

A big move toward promoting the fact and appearance of independence. True, it can be an expensive proposition -- for our clients, for us, and for the business community as a whole. There is no question about that. There are additional reporting requirements, and more extensive disclosures and control systems put in place to meet them.

But the cost of lost public confidence is even higher. Here are some costs to consider:

• What is a fair price for restoring public trust in the capital markets?

• How can business not fully embrace the spirit of Sarbanes-Oxley when the stakes are so high?

• If accounting firms are not considered viable and independent, how can we fulfill our essential role, which the Congress has mandated for us?

I'll begin to answer those questions by saying that we can measure the positive influence of Sarbanes-Oxley on many different levels. Some evidence for Sarbanes-Oxley's success is a matter of public record. For example, the Securities and Exchange Commission is far more aggressive than ever before in identifying corporate fraud cases and bringing charges. Under Bill Donaldson's leadership, the SEC staff is putting sharper teeth into detecting corporate fraud.

Through the end of July, the SEC on his watch had filed 258 enforcement actions, 72 of them involving financial fraud or reporting. The commission has sought to prohibit 95 offending corporate executives and directors from holding such positions with publicly traded companies.

The Public Companies Accounting Oversight Board is now in business. It's responsible for taking a hard look at the accounting profession and our role in ensuring accurate financial reporting. We welcome the scrutiny.

I have been very impressed with Bill McDonough and believe that he will be a very thoughtful regulator. He has an interest in helping restore the image of the public

accounting profession and our ability to attract the top business school graduates. There is a strong, shared responsibility between the regulated and the regulator to help make Sarbanes-Oxley work. It is so important for our profession to restore the public's confidence in our character, backbone and integrity.

In contrast to manufacturing or retail businesses, we don't sell products that you can put in a box, and take home. What we have to offer ultimately is simply the character, integrity and intellect of our people. Therefore, the strength of character of our people, and their focus on the public trust, is crucial to our profession.

Some of the evidence of the act's success comes from my personal experience. I know Sarbanes-Oxley is having an impact because I see it every day. In my travels across the country. In visits to our clients. In meetings with our partners and our people. In my discussions with the audit committees, CEOs, CFOs, and controllers, the people who have to make it work. I'd like to share some observations about their experiences in dealing with Sarbanes-Oxley:

• One very simple indicator is the amount of time Audit Committees and auditors are devoting to discharge their responsibilities. In many cases, the number of Audit Committee meetings have doubled, and the time spent in the meetings has substantially increased.

• Many Audit Committees are holding Executive Sessions with the auditors several times during the year. This all has impact in increasing the understanding of Audit Committee members of key issues, and allowing Audit Committee members many opportunities to stress their high expectations of the audit engagement team.

• During a recent meeting, the CFO of one large client told me that the new regulations were helping his entire global finance staff focus their efforts on the quality of financial reporting. He was proud of his disclosure committee and the thoroughness of their quarterly process.The CFO brought out three, 3-inch-thick binders filled with certifications gathered from the company's 140 locations. While he felt they had always had a quality financial reporting process, he told me that Sarbanes-Oxley had generated a sense of greater urgency and importance in the financial reporting process and its transparency. It was costly, but he believed he had eliminated the risk of fraudulent financial reporting.

• The CFO of another company, one of the largest in the U.S., said the aftermath of the scandals and the new regulations has everyone on the same page at his company. He no longer feels like the lone ranger trying to protect the efficacy of his company's financial reporting from aggressive financial engineering. Under Sarbanes-Oxley, this CFO had gone from being a referee between company factions, to a financial executive who could confidently certify his company's financial results and accept clear accountability.

Our clients and our professionals on engagement teams are actively engaged in a substantial effort to implement Section 404 reporting under Sarbanes-Oxley. This is a big effort, but it is generating a thorough review of internal control systems and it is prompting remediation of weak systems. This would not likely have been as high a priority in all cases, if it were not for the requirements of Sarbanes-Oxley.

I mentioned earlier that Audit Committees were spending more time in the discharge of their duties. That came from my own discussions and personal observations, but we've also commissioned studies to find out if Sarbanes-Oxley is working effectively in the capital markets. This is what we found -- a survey we did of 66 large clients revealed that Audit Committees are spending considerably more time on the job than they did prior to Sarbanes-Oxley:

And audit committees are spending more time per session on the work at hand. Our survey revealed that the time spent in committee sessions has risen significantly. In most cases, it has increased more than a third.

These are, I believe, startling figures and tangible proof that audit committees are really keeping their eyes on the ball. It's further evidence this new legislation is accomplishing at least one of its important missions -- that of strengthening the role of the Audit Committee in the process.

We've also teamed with FEI on a poll of top financial officers at nearly 100 companies across the country. We asked them in real terms how Sarbanes-Oxley has affected their businesses. This is what they said:

The Critical View

Taken together, these two surveys of corporate executives in the midst of all this demonstrates that the Act is having real and beneficial impact on reducing the risk of fraud in financial reporting. Still, you'll continue to hear from some critics that Sarbanes-Oxley isn't working. For example, that it:

I acknowledge these concerns and appreciate them. However nothing that forces such a dramatic change in corporate accountability can escape intense input or different points of view -- especially a law like the Sarbanes-Oxley Act, perhaps the most sweeping securities reform since 1933. Any law that mandates such sweeping changes in business culture and process will take some time to accept and implement. But no one said that restoring our profession and the public's trust in it would be easy, immediate or without cost. Doing so will inevitably require time. The problems we are addressing developed over many years. Fixing them will require some time, as well.

Another often-heard complaint is that, for all the high-level allegations lodged against the executives at Enron few have been held legally accountable. I understand the concern. But our legal process is deliberate and careful and it will take some time for all this to be sorted out. I think part of the frustration stems from the fact that the public is far more knowledgeable now about financial reporting than ever before. Investors have learned so much about accounting irregularities and misleading disclosures. The public does not like it, and neither do I. But Sarbanes-Oxley is helping to fix that. It's raised the performance bar much higher than before. It's applying very specific standards for reporting. It is taking us in the right direction, even though the public is more demanding and expects faster and more aggressive action than ever before.

I would be naive to claim that regulatory efforts can permanently prevent scandals such as Enron, WorldCom and HealthSouth from happening again. I'm convinced, however, that the reforms we've seen in the past year or so are reducing that risk. That's the strongest testimonial for any regulatory action that affects the business community.

We may not like every last provision of Sarbanes-Oxley, but if it works -- if it indeed results in a meaningful restoration of the public's confidence in the financial marketplace -- then it's a success. And, we have been impressed with the thoughtful, responsible approach taken by the PCAOB. What we need to do now sounds simple, perhaps obvious. We must:

Now is not the time to complicate the regulatory environment still further, making it more difficult for Sarbanes-Oxley to achieve its intended effect. Developments such as those at HealthSouth might rally critics who believe that even more regulation is necessary. That would be a mistake. I have had, and still have, confidence in the integrity of the vast majority of members of our profession and in the executive officers of corporate America. A vast majority of the men and women who lead our corporations, companies, and firms are honest, ethical people. They understand the law's importance in restoring public confidence in American business. Sarbanes-Oxley not only will make a difference in the years ahead. It has changed the American business landscape. The real test, however, will occur with the next market bubble, which, as history suggests, is inevitable. Will the current reforms have strengthened the system sufficiently to prevent the mistakes and abuses that occur when the markets overheat? To maximize our chances, we must do everything we can to implement the provisions of Sarbanes-Oxley as faithfully as possible. We must comply with both the intent and the letter of the law. My Firm and our people will do our part to make the law work. I believe that others will as well.

In five years, I predict that the entire accounting profession and all participants in the financial reporting process will look back on Sarbanes-Oxley and say it reduced the risk of fraud in financial reporting.

I want to thank all of you again for inviting me to talk about the state of reform in our business.