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U.S. Securities and Exchange Commission

Statement by SEC Staff:
Opening Statement: Commission Open Meeting on Record Retention (§802) and Independence (Title II)


Jackson M. Day

Acting Chief Accountant
U.S. Securities and Exchange Commission

SEC Headquarters, Washington, D.C.
November 19, 2002

Thank you.

Chairman Pitt and members of the Commission: Today is an important day for investors.

The Office of the Chief Accountant brings to the Commission two separate rule proposals to implement certain provisions of the Sarbanes-Oxley Act. The first relates to audit workpaper retention and the second relates to auditor independence.

Before I move on I would like to say thank you to a few people who made this happen. First, I would like to thank the Chairman, each of the Commissioners, and their staffs for the thoughtful and important contributions made to these proposals.

I also would like to express my gratitude to those in the other offices and divisions who have worked closely with us in developing these proposals. In particular, I want to acknowledge and thank the following people:

  • Charley Niemeier, Samantha Ross and Lauri Stegman in Enforcement;
  • Ray Be in the Division of Corporation Finance;
  • Brian Bullard, Barry Miller, Paul Cellupica and Susan Nash in Investment Management;
  • Jonathan Sokobin in the Office of Economic Analysis; and
  • David Fredrickson and Meridith Mitchell in the Office of General Counsel.

Finally, I must thank my colleagues in the Office of the Chief Accountant, especially Bob Burns, Sam Burke, Paul Munter and Doug Alkema who put many hours into these proposals.

Let me set the context. The Sarbanes-Oxley Act directs the Commission to issue final rules by January 26, 2003 to implement the Act's guidance on audit workpaper retention and auditor independence.

As my colleagues will soon elaborate, we have carefully analyzed the letter and more importantly the spirit of the Act as we developed these proposals. We believe that the proposed rules are consistent with both the legislative intent and our broader mandate of protecting investor interests.

Today, we hope to advance the interests of investors. First, we are asking the Commission to create incentives for auditors to be more rigorous by requiring that they keep more evidence of their activities.

We ask for those new rules so that we can understand both auditors conclusions and the basis for them. Bob Burns will lead that discussion.

Second, we will ask the Commission to propose new, more rigorous independence rules. Our aim is to improve the credibility of the numbers used by investors when making investment decisions. Investors must have credible information to have confidence in our markets.

Sam Burke will provide the details of our proposal. But let me say that our goal is simple. To take the guidance in the Act and add the necessary definition and precision so that the rules can be most effectively implemented.

For example, Sam will describe how we propose to define certain non-audit services. He will also describe how we propose to make disclosures about fees paid to auditors a more effective communication to investors. And, how we hope to enhance the role of audit committees.

Now I would like to turn the microcphone over to Bob so that we can get started.



Modified: 12/03/2002