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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: "Doug" at Internet Date: 09/11/2000 7:55 AM Normal TO: RULE-COMMENTS at 03SEC Subject: RE: File No. S7-13-00 ------------------------------- Message Contents Douglas Beal Subject: File No. S7-13-00 Author: "Doug" at Internet Date: 09/08/2000 3:34 PM I support strong rules that divorce auditing from consulting. Mixing interestes like that leads to subtle corruption. I know the auditors will be up in arms against any such rules, because it represents large amounts of cash to them. But I have vested interest supporting such rules, not only because impartial auditing is important to my investements, but also because subtle corruptions propagate feelings of apathy in the populace. Thanks, Doug These opinions do not necessarly reflect those of Streambox, Inc.

Author: Bill Dunham at Internet Date: 09/11/2000 1:54 PM Normal TO: RULE-COMMENTS at 03SEC Subject: re: S7-13-00 ------------------------------- Message Contents While I am only a small individual investor and of little significance in a sea of institutional investors, I have taken this moment to let my voice be heard on a most recent issue. I am in agreement with your proposal to separate auditing services from consulting services. The significant growth in consulting services within accounting firms leaves open the potential for errors of judgment in their auditing services. I understand that actual hard evidence may not be apparent on the surface. However, it becomes obvious that auditing judgment may be clouded when large sums of potential revenues are dependent upon an auditing decision from any firm that derives great revenues from consulting services to the same organizations it is responsible for auditing. The essence of good auditing is independent decision making. It is most difficult to sustain independence when you are responsible to a company for a good portion of your revenues in both consulting and auditing services. The separation of consulting and auditing is intuitive if a firm is to maintain independence in its auditing procedures. I believe that independence will contribute greatly to transparency. I believe this is the ultimate goal, in order to provide the same rules for all within our markets. Thank you for your vigilance on this issue. B. Raymond Dunham

Author: at Internet Date: 09/11/2000 11:19 AM Normal TO: RULE-COMMENTS at 03SEC Subject: Re: File No. S7-13-00 ------------------------------- Message Contents In a message dated 9/11/00 10:38:18 AM Eastern Daylight Time, Rule-Comments@sec.gov writes: << Auditing and consulting should always be independant of one another. To me their coexistance by the same firm or related firms is a breach of integrity, unprofessional and contrary to ethics. Carol Jean G. Ferrante>>

Author: "Jim Fifield" at Internet Date: 09/11/2000 12:25 PM Normal TO: RULE-COMMENTS at 03SEC Subject: Fwd: Re: S7-13-00 ------------------------------- Message Contents >Subject: S7-13-00 >Author: "Jim Fifield" at Internet >Date: 09/08/2000 5:36 PM > > >Auditors who share lucrative consulting contracts with the audited >client have an obvious conflict of interest. This type of conflict >has professional athletes banned from gambling in their sport. I suppose >one can require that proof of a conflict has to be proven. I suggest you >look no further than the record of professional money managers >who have embezzled millions from their clients including some high profile >cases. Some of those people were CPAs.Comments from James Fifield >

Author: at Internet Date: 09/11/2000 6:32 PM Normal TO: RULE-COMMENTS at 03SEC CC: fedleg@aicpa.org at Internet Subject: Proposed Rule Governing Audit Independence ------------------------------- Message Contents To Whom It May Concern: We, the members and staff of Franklin & Walsh CPAs, are concerned about the outcomes of the pending Proposed Rule Governing Audit Independence. We feel that: 1 The comment period is much too brief for the professsion to understand its impact; 2. The Independence Standards Board is already set up to address this issue; 3. The SEC is acting without empirical evidence that non-audit services actually compromise audit quality or auditor independence; 4. There could be a negative impact on the firm's audit practice and overall financial health as a result of this pending rule. Actually, it is in the best interests of the public to maintain a healthy and competitive pool of smaller accounting firms so that the public has a choice and so that it can obtain the services it needs at the most effective costs....costs borne by the free market system....a market in which many potential providers competitively vie for the work. When the market is systematically weakened by an excessive abundance of regulations which have weak purposes the public suffers and will be destined to pay a huge price to oligopolistic and non-competitive survivors in the aftermath. This does not need to happen if governance is tempered with reason and careful use of governmental authority. The expectation that all non-audit accounting services should cease between an auditing firm and the client is unrealistic and unnecessary. The mere fact that there are firms associated with other firms who conduct audits is not a valid cause to militate against those firms in any particular vein to prevent such firms from providing accounting services to clients audited by the associated firms. Firms of professional practitioners affiliate themselves with other practitioners for a variety of reasons usually having a beneficial professional effect. The sharing of knowledge is useful to the consuming public. The cooperation of one CPA firm with another does not automatically spell trouble for the users of audited financial statements. Such affiliations are not usually the signal of wrong doing or a lack of independence. The mass indictment of all accounting firms for the transgressions of a few of them is tantamount to the incarceration of all society members just because a few of them deserve to be incarcerated. We trust that you will re-consider your proposed ruling and that you will temper your rulings with reason and that you will not hamper the accounting firms in their desire to provide necessary services to the consuming public unless you have clear and sufficient grounds upon which to render your verdicts. This is a serious issue to the health of small accounting firms. We have worked with our blood and our sweat to achieve precious little gains in a painstaking quest to become and remain professionals. We can not afford to have our hands tied while attempting to serve our clients. Sincerely, John David Franklin

Author: "Robin M Hunziker" at Internet Date: 09/11/2000 1:14 PM Normal TO: RULE-COMMENTS at 03SEC Subject: Re: File No. S7-13-00 -Reply ------------------------------- Message Contents Robin Hunziker ______________________________ Reply Separator _________________________________ Subject: File No. S7-13-00 Author: "Robin M Hunziker" at Internet Date: 09/08/2000 5:47 PM As a corporate attorney, I have always been very concerned about the degree of non-accountability that third party auditors enjoy. This is especially exacerbated by the inherent conflict created by the auditor also performing consulting services. I believe that third party auditors should have a clear fiduciary duty to all who might reasonably rely on the auditors' findings and should be precluded from entering into any further relationships absent clear proof that the fiduciary duty is not compromised in any manner.

Author: "Kruse; Brian D" at Internet Date: 09/11/2000 8:03 AM Normal TO: RULE-COMMENTS at 03SEC Subject: RE: File No. S7-13-00 ------------------------------- Message Contents brian kruse > > Subject: File No. S7-13-00 > Author: "Kruse; Brian D" at Internet > Date: 09/08/2000 2:25 PM > > > As a former accountant and a long term investor, > I am very concerned about the conflict of interest that the Big Six Accounting > Firms have with their consulting practices. When I was an auditor, independence > was difficult enough with an important client. > In my opinion, I'm not comfortable relying on financial statements where the > accounting firm has large contracts for consulting services. It is one of my > larger concerns about investing in the stock market to begin with. Hopefully, > you will approve this measure. > >

Author: "jefflane" at Internet Date: 09/11/2000 10:40 AM Normal TO: RULE-COMMENTS at 03SEC Subject: S7-13-00 and Auditor independence ------------------------------- Message Contents I was pleased to read recently that the SEC is considering tightening the rules concerning auditor independence. With markets moving at lightening speeds nowadays, vigilence in the procurement and dissemination of reliable information for the investing public is even more important than ever before. Revenues from "consulting" services rendered by firms that also are responsible for "auditing" have risen at an alarming rate over the last few years. It's just hard to argue with the Biblical admonition that "where your treasure is, there will your heart be also." Audits have now apparently become almost a foot-in-the-door marketing opportunity for the more lucrative services an accounting firm can provide. The problem is that at some point, this creates a temptation to overlook some of the truly critical analysis that an auditor should perform, because of the fear that an unfavorable word from the audit will lead to the loss of not only the auditing business, but tons more business, as well. I suspect that you are hearing mostly from accounting firms concerning this rule-making, and that they are arguing: (1) that the ability to cross-market isn't really creating serious problems with the exercise of professional judgment, because no auditor wants her reputation tarnished by a subsequent disclosure that she let important things slip; and (2) that taking away an auditor's ability to cross market other services would irreparably damage the firm's ability to make a decent living. There is probably some truth to each of these arguments. I doubt that a reputable firm will deliberately allow wholesale fraud to slip through an audit, because of the damage that would do to the auditor's reputation. However, if we believe in trying to achieve efficient markets for publicly traded companies, the real danger isn't as much in the large-scale frauds, as it is in the accumulation of smaller "judgment calls" that an auditor with other commercial interests may be tempted to let slide, even though someone with wholly independent judgment would not. If the audited company gets the benefit of every such call, and if the auditor overlooks some other little things that, by themselves, are not individually important, the effect may be to make the whole of the company's financial picture look rosier than it really ought to look. That kind of poor information in the marketplace penalizes all investors in that company, and also penalizes companies competing for those same investors whose books are more accurate. Second, it is undoubtedly true (at least on a short-term basis) that if the SEC restricted an auditor's ability to sell other services, auditing as a business would be less attractive compared to more lucrative consulting services, and that this could hurt both the auditing firms, and the marketplace for audits. However, I believe that this would be only a short-term problem. Even with such a rule in place, publicly traded companies will still need to hire auditors, and the companies that provide audits will still need to make a living. The marketplace for audits may need some temporary readjustment, but by and large, the market for audits will sort itself out, as markets always do, especially when everyone has an opportunity to be fully and fairly informed about the market. I know it took some courage for the SEC to buck the investment guru lobby to eliminate selective disclosures, but in a very short time, the entire market will be much better for it. Individual investors like me will always be especially grateful. In the long run, requiring true auditor independence will have just as profound impact for all investors (individual and otherwise). I hope the SEC will show a similar kind of courage with this decsision. Thank you for your time, Jeffrey B. Lane jefflane@hqmail.com

Author: "James V. Leonesio" at Internet Date: 09/11/2000 2:04 PM Normal TO: RULE-COMMENTS at 03SEC Subject: Re: File No. S7-13-00 ------------------------------- Message Contents James V. Leonesio > > > Subject: File No. S7-13-00 > Author: "James V. Leonesio" at Internet > Date: 09/08/2000 6:34 PM > > > Please carry on concerning Auditor Independence! Thank you and remain diligent. >

Author: "Dr Greg Lomas" at Internet Date: 09/11/2000 9:05 AM Normal TO: RULE-COMMENTS at 03SEC Subject: audit independence ------------------------------- Message Contents As an investor who must rely on audited financial statements, this is the bedrock on which we the public make decisions. There can be no question of compromise. I agree that auditing and other services should be completely separate. Greg Lomas

Author: "Mike Mitchell" at Internet Date: 09/11/2000 9:10 AM Normal TO: RULE-COMMENTS at 03SEC Subject: Auditor Independence ------------------------------- Message Contents Dear Sirs: Why is there even a question about of Auditor Independence, when the obviousness of the conflict of interest is so apparent? The relation between the auditor and the company should be adversarial for the audit to be meaningful. Sincerely yours, Mike Mitchell 2804 Brierdale Lane Bowie, Maryland 20715

Author: "Greg Pence" at Internet Date: 09/11/2000 9:16 AM Normal TO: RULE-COMMENTS at 03SEC Subject: Re: Separate Auditing from Consulting ------------------------------- Message Contents My name is Gregory Pence, and my address is: 71 Toussin Ave. Kentfield. CA 94904 phone 415-836-1114 > > I respectfully submit my opinion that auditing is a profession which must uphold > the appearance of impartiality. Any conflict whether real or imagined cannot be > distinguished by those on the outside especially given the intimate nature of > the auditors task. Each auditor must have a legal and ethical obligation to > their profession otherwise the profession will be useless. The profession must > be revitalized so that we may be able to put our trust in our auditors. > ----------------------------------------------------------------------

Author: "Big" at Internet Date: 09/11/2000 8:18 AM Normal TO: RULE-COMMENTS at 03SEC Subject: Re: "File No. S7-13-00" ------------------------------- Message Contents ------------ wayne phillips Subject: "File No. S7-13-00" Author: "Big" at Internet Date: 09/08/2000 2:40 PM ---------- individual investor, here, who thinks that auditors are not independent . . . AND SHOULD BE ! Big Freedom isn't free . . . the price of freedom is eternal vigilance . . .

Author: "Kerry Quillan" at Internet Date: 09/11/2000 9:36 AM Normal TO: RULE-COMMENTS at 03SEC TO: fedleg@aicpa.org at Internet Subject: SEC's proposed rule to prohibit auditors from rendering non- ------------------------------- Message Contents Dear Chairman Arthur Levitt, Commissioners Paul Casey, Isaac Hunt, and Laura Unger, I am a CPA practicing in a small firm in Fairbanks, Alaska. I am writing to express my grave concern regarding the SEC's proposed rule to prohibit auditors from rendering non-audit services to their audit clients. We do not do SEC work, however, rules promulgated by the SEC usually set the standard for the industry, as other regulators adopt them. As a small firm practitioner, serving small businesses, this ruling would be crippling both to our practice and to our small business clients. Our clients are closely held, family businesses without the resources to hire comptrollers. The accounting is normally performed by a full-charge bookkeeper. Our clients rely on us to be their business advisors, tax planners, estate planners, and consultants in a myriad of other areas. They rely on us to advise them on difficult accounting issues. They rely on us to draft their financial statements in the course of our review or audit engagement. They rely on us to provide adjusting and closing entries to their general ledger to correct their internal bookkeeping. They trust us more than anyone. Our position as their most trusted business advisor allows us to know their business intimately, which allows us to provide improved audits. The better you know your client, the better you can audit, as you know what the risky areas are and where to concentrate audit effort. This ruling, if adopted by SEC and then adopted by other regulators, would effectively require a firm to be either an auditor or a non-auditor. It would require small businesses, which are often already strapped for cash, to hire two firms and deal with two sets of accountants, at a greatly increased cost to them, both in money, time, and productivity. There has been no compelling evidence to suggest that providing non-attest services to an audit client impairs independence in an audit. I believe this proposed ruling is out of touch with the needs of small business. This ruling would also severely hamper competition. If this rule is implemented, I believe many more CPA firms would opt to no longer provide auditing services, and therefore the pool of available auditors will shrink considerably. This would in turn drive up the price of obtaining an audit, and probably lower the quality of audits, because quality business advisor-CPAs will no longer provide them. I respectfully request that you defeat this proposed rule. Kerry Quillin, C.P.A. Copies: Senator Ted Stevens, Senator Frank Murkowski, Congressman Don Young.

Author: "Shelden H. Radin" at Internet Date: 09/11/2000 5:39 PM Normal TO: RULE-COMMENTS at 03SEC Subject: Auditors ------------------------------- Message Contents As a stockholder in many companies, including Rite Aid, I am very concerned about the accuracy and reliability of audits. It concerns me when I hear that auditors often also sell consulting services to the companies they audit. That situation clearly may lead to a conflict of interest for the auditor. I don't think I have any difficulty with auditors selling consulting services to companies they DON'T audit, although I'd feel most comfortable with the auditing and consulting businesses being completely separated. Shelden H. Radin 1939 Weyhill Drive Center Valley, PA 18034

Author: "Jose Salazar" at Internet Date: 09/11/2000 10:43 PM Normal TO: RULE-COMMENTS at 03SEC Subject: Accounting Reform ------------------------------- Message Contents Dear Sir or Madam: I am a practicing CPA that strongly believes that reform is imminently necessary. I do not believe that anyone learned anything from the insolvency problems of the "Savings and Loan" fiasco, but I do believe there is still time to avert a Dot.com nightmare. I believe that the Dot.com problem is going to make the "Savings and Loan" fiasco look like a bookkeeping error. If the CPAs did not get a black over the "Savings and Loan" problem than they will definitely get one when the Dot.Com's disintegrate. I have been a CPA for the last 20 years and I have seen the accounting profession go from doing 80% acounting and auditing work to doing approximately 80% consulting work. Unfortunately, the passport into the lucrative field of consulting can only be obtained wearing an Auditing badge. That is why Accounting firms want to keep both consulting and auditing, regardless of the independence issues. Once you've tasted some of that consulting money it is not easy going back to the days of old. That is why I think that the only real solution is for the SEC to assume the role or provide a mechanism for that role. Accounting Firms use the CPA credential as bestowing some type of "authority". That because of this "Authority" having an accounting firm provide you consulting is the least hazardous road. Otherwise things may not come out the way you want them too. All this things will come out when our next shake up occurs. Of course I myself and all consumers prefer not to have the shake up, because I don't think the SEC will have the fortitude to stand up to the Accounting Profession. Sincerely, Jose Salazar _________________________________________________________________________

Author: Robert Schaap at Internet Date: 09/11/2000 9:53 AM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents ARE AUDITORS INDEPENDENT? The SEC would like to see accounting and consulting services kept separate to prevent conflicts of interest. The stakes are high, and when consulting fees come to be many times more important than audit fees, it should be patently obvious to anybody that independence is likely to be impaired. When self-interests predominate, trouble is not far behind. And it comes into special focus as a profession becomes a business. Any time that an auditing firm was actually facing the possibility of having "smoking gun evidence" disclosed, it would quietly settle the case and seal the record as a condition of the settlement -- preventing the SEC investigators from ever being able to publicly disclose what they know to be true. And this is precisely what the SEC is faced with -- attempting to convince the public of the severity of a problem it gets to see up close, but isn't allowed to actually reveal the details of. As a member of the public, I would like to see the SEC's desires in this case come to fruition. Sincerely, Robert J. Schaap

Author: at Internet Date: 09/11/2000 7:21 PM Normal TO: RULE-COMMENTS at 03SEC CC: frank02@foxinternet.net at Internet Subject: Auditing vs Consulting ------------------------------- Message Contents I hold numerous stocks within my IRAs. I am very concerned that Auditing companies can also provide consulting services to the companies they audit. I understand that, in many cases, the consulting services provide income well beyond that provided by audits. I have come to rely on the 10Qs and 10Ks to evaluate companies. This audit vs consulting possible conflict of interest really concerns me. Please correct this alarming situation as soon as reasonable. Stanford D. Schneider 12114 160 Ave. KPN Gig Harbor, WA. 98329 253 884 6484.

Author: at Internet Date: 09/11/2000 3:24 PM Normal TO: RULE-COMMENTS at 03SEC Subject: Separation of duties ------------------------------- Message Contents I agree with the SEC position that major accounting firms who perform audits of publicly traded companies should be prohibited from providing business consulting services. I believe that the firms independence can certainly be question. This, in my opinion, is enough reason to prohibit the combination of audit and other business services. Ross B. Taylor President & CEO 972-401-2100

Author: at Internet Date: 09/11/2000 11:32 AM Normal TO: RULE-COMMENTS at 03SEC Subject: Auditing Vs Consulting ------------------------------- Message Contents Please continue looking into the practice of an individual or company auditing an organization and being employed as a consultant. This practice raises a conflict of interest that is obvious to the commonsense part of the brain, yet odd to think otherwise. I am an individual investor who relies on the accuracy of the numbers a company reports to make a decision as to put my hard earned money into. This conflict of interest can, will and does occur. To let it continue would be a violation of right Vs wrong. Thanking You Chris M. Villareal

Author: "Christopher Woo" at Internet Date: 09/11/2000 11:38 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents To Whom it May Concern, The issue of auditor independence is a critical one, and though no concrete evidence of compromised audits has not been found, this issue must be addressed. The potential for conflict of interest occuring with accounting firms seeking to cross-sell their consulting practices is tremendous, and in the end, it is the public who is harmed, as evidenced by the scandals at MicroStrategy and Waste Management. Please consider the welfare of the public interest in your analysis of this issue and act to separate accounting firms from their consulting arms. Thank you. Sincerely, Chris Woo