U.S. Securities & Exchange Commission
SEC Seal
Home | Previous Page
U.S. Securities and Exchange Commission

Comments on Proposed Rule:
Revision of the Commission's Auditor Independence Requirements

[Release Nos. 33-7870; 34-42994; 35-27193; IC-24549; IA-1884; File No. S7-13-00]

Author: at Internet Date: 09/10/2000 12:19 AM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents TO: Security Exchange Commission Staff - File No. S7-13-00 FROM Ken Amerson 5957 Woodridge Rock San Antonio, TX 78249 RE: Proposed Ruling - Separation Independent Audit Services and Auditors Consulting Services DATE: September 9, 2000 TO WHOM IT CONCERNS: I kindly thank you for the opportunity to enter a comment into the proceedings for the proposed S.E.C. rule separating independent audit services from consulting services. I am not a C.P.A. nor am I involved with the provision of consulting services. I admire and respect each of these essential services. On occasion over the years I have sought out and have had the good fortune to benefit from the services of independent auditors as well as from their consulting services. For slightly over three years I have followed the development of the discusion's many facets. My view, offered at this time, is to encourage the S.E.C. rule making efforts to totally separate activities which provide independent auditors' opinions from activities which provide consultations. All future parties are best served with the clarity and wisdom of this approach. Understandably, some short term service employment and service investor dislocations may occur within auditing firms. In the long run, small and large investors, local as well as global, will continue to share a level playing field with their recognition and piece of mind provided by the value and integrity of an independent certified audit opinion. Thank you.

Author: "Roland" at Internet Date: 09/10/2000 10:32 AM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents No audit firm should be providing an opinion of the financial statements of a company that is also paying any amount whatsoever for consulting services of the same or related firm! Roland W. Cyr, Auditor 10530 Providence Way Fairfax, VA 22030

Author: at Internet Date: 09/10/2000 1:14 PM Normal TO: RULE-COMMENTS at 03SEC Subject: s7-13-00 ------------------------------- Message Contents As an outsider and individual investor, playing by the rules and trying to improve myself and family, in the pursuit of happiness and the American dream, I have to rely on truthful financial statements to make investment decisions. If financial statements misrepresent the economic performance of a firm, false guidance will undermine our investments. It is imperative that auditors remain independent of the firm they audit and beyond the slightest reproach. The degree of risk may otherwise drive us all away from the stock market. Our investments should not be undermined by the fraudulent activity that may arise from an auditor/client relationship at the expense of the general market investor. This asymmetry of information and misrepresentation undermines the integrity of the whole market. Should that independence erode, it will certainly compromise the entire stock market and our capitalist system. Joe Dernfeld

Author: "John Dossing" at Internet Date: 09/10/2000 5:05 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents SEC Chairman Arthur Levitt , I beleive Like John Bogle, legendary founder of The Vanguard Group and index fund investing, that there is something inherently wrong in the current system, which allows Auditors to audit, while consulting with the same company. Common sense tells me, and other indiviual investers, this conflict of interests will lead to at the very least the appearance of conflict of interest. How can we trust any audits with the appearance of a conflict of interest. Why invest if we can't trust the figures presented to us in the financial statements? Best Regards, John Dossing 827 Ashmount Ln Arlington, Tx 76017 817-467-6205 email: jdossing@dialfree.net

Author: "The Doyles" at Internet Date: 09/10/2000 10:49 AM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents Dear sirs: It appears to me that collusion is the only predictable product of Companies that own and sell both consulting and accounting services. Collusion being creative accounting that masks bad news from the owners, stockholders. I would believe that in fairness and good business practices both of these services should not be offered to the same company by one company. If they are, surely the end product should be suspect and probably will not produce the unadulterated facts. We all know that he who has the Gold makes the rules, and in the case of combined consulting and auditing firms, it follows that the auditing firms must confirm that the council of its consulting firms is working. In other words prove that the plan is working. Aden J Doyle

Author: "DEmerson" at Internet Date: 09/10/2000 8:35 AM Normal TO: RULE-COMMENTS at 03SEC Subject: s7-13-00 ------------------------------- Message Contents Dear Sirs I can not see how there would not be a conflict. Deborah Emerson

Author: Bruce Francois at Internet Date: 09/10/2000 3:09 AM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents As a concerned investor, and a realist with limited confidence in the ethics of auditors who simultaneously sell consulting services, I encourage the SEC to move towards ensuring that auditing services can not be offered by the same client offering consulting services. Thank you, Bruce Francois

Author: "Frank B. Geng" at Internet Date: 09/10/2000 8:45 PM Normal TO: RULE-COMMENTS at 03SEC CC: "'pricorphq@aol.com'" at Internet Subject: To Support SEC Draft on Proposed Independence Rule S7-13-00 ------------------------------- Message Contents Dear Chairman Authur Levitt Commissioner Paul Casey, Isaac Hunt, Laura Unger, My name is Frank Geng, a licensed CPA in Illinois. After I read the SEC draft on proposed independence rule, I cheer for this route SEC should have taken long time ago. As an CPA, I am well aware of the independence both in appearance and indeed is the virtue of the practice. There are a lot of firms are currently providing both consulting and assurance services to list companies. In fact their assurance are partially, if not entirely, based upon the consulting recommendations the same company made in the past. Moreover, some firms even provide long-term internal control services and the same time external assurance service. I strongly oppose such conducts not only because they have different objectives in nature, but with the fear of weakening the assurance aspect of the traditional work a CPA usually provides. I would like to see a passage of this draft and make it not only a rule but also a living motto for all professionals. Sincerely, Frank Geng CPA

Author: at Internet Date: 09/10/2000 12:36 AM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents Dear SEC: I am an individual investor. I would like to register my support for your proposed rule that accounting and consulting services be kept separate to prevent conflicts of interest. Thank you, Arthur Gross (arthur.c.gross@att.net)

Author: "L/R Hesmondhalgh" at Internet Date: 09/10/2000 3:42 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File S7-13-00 ------------------------------- Message Contents The notion that those who audit companies will have no other ties to those whose fiscal health they are reporting on would seem to be common sense. Apparently this is exactly what the companies with the most to hide and the accounting/consulting firms with an eye solely to their profit margins are counting on in regard to public and political disinformation. As far as insisting on some measure of evidence before accepting any regulatory controls; previous scandals in the industry have shown that the participants are very, very adept at covering their tracks. Or in the case of the unlucky few, very adept at demanding settlement conditions which prevent the full extent of the problem from being used to monitor the entire system. As an individual investor, I would like the SEC to be aware that I appreciate their attempts to reinforce the Concept of the Bleeding Obvious: it's a difficult situation when an auditor is paid by the entity it is supposed to report on. It is an impossible situation when the auditor is also paid for information on circumventing the audit.... Thank you for your time. Lisa Hesmondhalgh PSC 1005, Box 48 FPO AE 09593-0002

Author: at Internet Date: 09/10/2000 9:24 AM Normal TO: RULE-COMMENTS at 03SEC Subject: Independence of audit and consulting ------------------------------- Message Contents I have a strong belief that, while it sounds good that a CPA firm can be professional when it comes to doing the right thing with respect to its duties, when you have as many dollars involved in fees that this will almost always affect most peoples judgment. Unfortunately, the nature of man has shown time and again through the ages that money can corrupt a person's better or even best judgment. A firm faced with the situation of discovering a problem with the accounting practices of one of its clients has a tough enough assignment to do the right thing when you are talking about hundreds of thousands of dollars. If you throw more fees at risk from a consulting standpoint it makes the decision that much more difficult to do the right thing. With the public trust and money at risk with the proper functioning of the role of CPA firms in this country, I think it imperative there be a separation of consulting fees from audit fees. Thank you, Arthur E. Hish, CPA

Author: "njacklaw" at Internet Date: 09/10/2000 8:09 AM Normal TO: RULE-COMMENTS at 03SEC Subject: File NO. S7-13-00 ------------------------------- Message Contents Gentlepeople: The issue of whether auditors should be prohibited from consulting the businesses they audit is a no brainer in my humble opinion. In my profession (attorney) we have very strict rules when even the appearance of a conflict of interest arises. We must disclose the conflict and get our clients permission to continue representation. With so many people now researching companies on their own to make investment decisions for their own and their family's future it is imperative that an audit be critical and objective. The chance that an auditors results might be tainted by financial self interest should be prohibited by rule. Thank You, Neil Jackson (Troutdale, Oregon

Author: at Internet Date: 09/10/2000 1:22 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 "Independent Audits" ------------------------------- Message Contents The very idea of an audit being "independent" under today's rules must stretch the limits of credibility in any sane investors mind. How on earth could an audit be objective, accurate, deep reach for real facts, etc. when the audited is paying the bill? Also, one must consider the auditing firm not only wants to maintain its auditing contract but in so many cases is trying to sell additional services to the company being audited? Evidence of wrong doing?? Surely you are not serious to honestly inquire as to what happened to evidence. (What about Firestone-Ford? It doesn't take a genius to deduct that no high ranking officer is going to spill his guts to the government and eliminate his job and pension.) Alas, I am not aware of anyone as yet figuring out how to enforce HONESTY. My only conclusion is that as an investor I must scatter my eggs in lots of baskets and hope that in the long run I will survive. James L. Knowles, Jr. 6936 Folger Drive, Charlotte, NC 28270

Author: "Kenneth Lavoie" at Internet Date: 09/10/2000 9:10 AM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents Sir / Madam I would like to add the voice of an individual investor to the testimony of Mr. John Bogle on the topic of required changes to ensure the independence of auditors. Having read a fair amount on the MicroStrategy debacle, it is clear to me that the current modus operendi of auditors all but eliminates any value their efforts may have for investors, but clearly enhances the business opportunities of the auditors parent companies. I applaud the efforts of the SEC in bringing this issue to light, and look forward to changes that will pass the common sense review, which current practices fail. Yours truly Kenneth E Lavoie

Author: at Internet Date: 09/10/2000 11:22 AM Normal TO: RULE-COMMENTS at 03SEC Subject: (no subject) ------------------------------- Message Contents The firm that audits a company should not be allowed to give other services such as consulting to the company. Audits should be kept independ of other services. Richard Lindell St. Paul Minnesota

Author: MNOBLES at Internet Date: 09/10/2000 10:23 AM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents I am writing to state my opinion regarding Auditor Independence. I work for an accounting firm as a secretray. I strongly feel that auditor independence is crucial to an accurate audit. While I am not an accountant, I have enough bookkeeping background to see the potential for misconduct. I believe the only ways to insure that there are no misstatements or "tweaking" of figures is to either audit the audit or to make sure the CPA firm performing the audit has no other financial relationship with the client besides performing the audit. Sincerely, Moira Nobles Sincerely, Moira Nobles

Author: at Internet Date: 09/10/2000 12:05 AM Normal TO: RULE-COMMENTS at 03SEC Subject: File S7-13-00 ------------------------------- Message Contents Yes, please get the Accounting profession to separate between auditing and consulting services. Also, I would add more staff to crosscheck the numbers that are being pumped out by the public companies, there is too much phony stuff going on out there and the CPAs are saying "DO IT UNTIL WE GET CAUGHT, THE ODDS ARE THAT YOU WILL NOT BE AUDITED BY THE SEC". That is what is going on out there, They started it in the Construction Industry, then the Insurance, then Health Care and now doing it on all companies. Don't let them bully you. J Peller

Author: at Internet Date: 09/10/2000 7:18 PM Normal TO: RULE-COMMENTS at 03SEC Subject: Auditors ------------------------------- Message Contents To Whom it Concerns: Auditors should not be allowed any other relationship with the companies they audit. Certainly any type of consulting is a conflict of interest. Tim Scarbrough Raybay9954@aol.com

Author: "Ray Schatz" at Internet Date: 09/10/2000 1:28 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents I for one, as a small independent investor am glad to see the SEC concerned about Auditor Independence. I too am concerned that Auditors are now selling services to the same clients they are auditing. It's hard to see how it is possible for them to retain much independence over the long term in such a situation. We small investors must depend on you for protection in this area Sincerely, R V Schatz rschatz@wizzards.net

Author: Frank Tilaro at Internet Date: 09/10/2000 5:17 PM Normal TO: RULE-COMMENTS at 03SEC Subject: ------------------------------- Message Contents -- I agree with Mr. Bogle on the subject of independent auditing of companies by accounting firms that provide consultation to the same company they are auditing. An 18% difference between consultative fees and accounting fees spells trouble for the individual investor who expects an unbiased audit. The SEC needs to examine this issue. Dr. Frank Tilaro

Author: Waterman at Internet Date: 09/10/2000 5:43 PM Normal TO: RULE-COMMENTS at 03SEC Subject: Seperation of Auditing and Consulting Services ------------------------------- Message Contents Seems to me to be a fairly clear conflict of interest for any company to make fees from both auditing and consulting for the same corporate client. And if the consulting fees are a larger component of income than - or growing faster than - the auditing fees, the conflict is simply increased. Little like the stock market recommendations of brokers working for brokerage houses with vested interests in the stock they are recommending... and which they don't, for reasons unknown, have to publicly declare when making the recommendations. But that one is another issue for another day. For now, can we please either make it illegal for any one accounting firm to fulfill both audit and consulting roles for the same corporation, or worst case scenario force them to disclose their consulting fees for that client in their auditors report Sue Waterman sewaterman@hotmail.com

Author: Fred Westervelt at Internet Date: 09/10/2000 9:26 AM Normal TO: RULE-COMMENTS at 03SEC Subject: independent auditors ------------------------------- Message Contents Sirs: I have just now been updated by Mr. T. Gardner and staff on the issue at hand- the possible (?likely) abuse of auditing and consulting activities in the financial (stock) world. I would add to this my serious concern that analysts, who are so powerful in manipulating market evaluations even in the face of contrary information, may be similarly conflicted. My credentials in this matter are negligible, but my sense of what is right is quite strong. It is imperative that there be absolute confidence (so far as possible) in the practices and control mechanisms of those institutions that guide and regulate our awesome economy, and that they be unsuspected. Caesar did no less for his wife. Please, be able to assure us that there be no improper collusions, that this is at least one area that is uncorrupted, and that we can thus sleep comfortable that our lifeblood will not be let wrongly. Thank you. F.B. Westervelt Milton Farm Charlottesville, Virginia 22902

Author: at Internet Date: 09/10/2000 2:33 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents I am 100% with the SEC to demand "Auditor Independence". There is certainly a conflict of interest with auditors also consulting with the same accounts that they audit the books. Let's be fair to the investors of all publicly held business. Most sincerely, Alicia Witt 17 Weebetook Ln. Cincinnati, Ohio 45208