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:  CHAIRMANOFFICE at SEC1
Date:    09/20/2000  11:45 AM
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TO: Rule-Comments at 03SEC
Subject: Auditor Independence
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Subject: Auditor Independence
Author:  "C. Richard Baker"  at Internet 
Date:    09/19/2000 5:29 PM
     
     
Dear Chairman Levitt,
     
I have been a professor of accounting and auditing for over 20 years.  I 
want to express my strong support for your attempts to increase the 
level of independence of the auditing profession, and in particular that 
of the Big 5 firms who audit virtually all companies with publicly 
traded securities in the United States.  In effect, the Big 5 firms have 
abdicated their public interest responsiblity in pursuit of increased 
wealth for themselves.  The Securities Acts and the various state 
securities laws granted a monopoly of practice to Certified Public 
Accountants so that investors would be able to receive reliable, 
unbiased and credible information for the purpose of making informed 
investment and credit decisions.  The Big 5 firms are increasingly 
involved as close business advisors to their clients, thus compromising 
their objectivity and independence.  Not only should auditors of 
companies with publicaly traded securities be circumscribed in their 
abilities to offer a myriad of services to audit clients, there also 
should be a strongly increased barrier between top management of client 
firms and the hiring process that determines which audit firm is 
engaged, the nature and scope of services to be performed, and the 
amount of the audit fee.  Moreover, the regulation of the audit 
profession should be in the hands of an independent regulator structure 
.  The Independent Standards Board and the Public Oversight Board as 
presently constituted do not achieve this end.  Both bodies should be 
completely independent of the AICPA and the large firms.
     
Sincerely yours,
     
C. Richard Baker
Associate Professor
University of Massachusetts Dartmouth 
North Dartmouth, MA 02747
E-mail: rbaker@umassd.edu
Phone: (508) 999-9243
     

Author:  "Dave Hockett"  at Internet
Date:    09/20/2000  6:04 PM
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TO: RULE-COMMENTS at 03SEC
Subject: S7-13-00
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I'm writing to protest the proposed SEC rule prohibiting non-audit services to 
CPA firm's attest clients.  My firm serves smaller SEC registrants that require 
considerable hand holding to comply with SEC reporting rules.  The draconian 
rule proposed by the SEC will effectively eliminate our ability to provide this 
service, which benefits the SEC, the client and the investing public.
     
Small registrants cannot afford to hire the expertise necessary to comply with 
the many regulations promulgated by the SEC and other regulators.  They rely on 
their CPA firms to perform not only the audit function but also advise them on 
the many systems, controls and policies they must follow in order to be 
successful in business and comply with the regulations. 
     
It will be next to impossible for these enterprises to segregate their single 
CPA firm relationship into multiple relationships in order to comply with the 
new independence rules.  CPA's will refuse to provide audit services or require 
excessive fee increases due to the inefficiencies imposed by these regulations. 
Most CPA firms below the Big Five in sizes will stop serving SEC registrants, 
further restricting the access of smaller companies to reasonably priced audit 
services.
     
The SEC has proposed these new rules with no empirical evidence to support its 
presumption that the prohibited services compromise independence. This proposal 
also makes it likely that even the largest audit firms will not be able to 
retain the specialist non-CPA experts that are necessary in today's technology 
driven environment to perform quality audits of large and small enterprises.
     
This quest for theoretical purity will surely reduce the quality of audits, 
limit access to auditing services and hurt the investing public that the SEC is 
supposed to protect.
     
Regards,
Dave Hockett, CPA

    Author:  bill hosmon  at Internet
Date:    09/20/2000  11:19 PM
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TO: RULE-COMMENTS at 03SEC
Subject: File No. S7-13-00
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I support the proposed Auditor Independence rule.  Auditors should 
be kept separate from consulting contracts.
     
Bill Hosmon
3334 Rosedale
Ann Arbor, MI 48108
     
     

    Author:  John McNulty  at Internet
Date:    09/20/2000  5:51 PM
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TO: RULE-COMMENTS at 03SEC
Subject: S7-13-00
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Dear SEC:
     
Your proposed rules to limit the scope of services of accountants is extremely 
unfair.  You are overreaching your authority.  This proposed rule will
do severe damage to the accounting profession if it is allowed to become 
law.  Most small accounting firms do not do SEC work, but eventually all 
small accounting firms will be negatively impacted because these rules 
tend to filter down into state regulation.  This will further weaken the 
CPA licensees and slowly but surely kill the profession.  All the good
people will choose other professions.  Eventually, the SEC will be negatively 
impacted because audit quality and efficiency will erode.  Audit firms
will be dull lifeless monopolistic bureaucracies under heavy regulation, 
scandals will erupt, corruption will seep into the diseased and broken 
system. 
     
Please reject this proposal now.
     
Sincerely, 
     
John McNulty
     

    Author:  Steven Pullara  at Internet
Date:    09/20/2000  3:53 PM
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TO: RULE-COMMENTS at 03SEC
Subject: File No. S7-13-00 Attention Jonathan G. Katz, Secretary
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Dear Mr. Katz: The purpose of this e-mail is to comment on SEC proposed rules 
regarding auditor independence. I have two concerns. First, I don't believe 
that performing non-audit services such as bookkeeping, human resource 
consulting services (such as recruiting and designing compensation packages), 
and financial information technology services (such as designing and 
implementing financial information services) impair an auditor's independence 
(either in fact or appearance) in situations where the client's senior 
management must review and approve suggestions and recommendations made by 
the consultant before implementation. In situations where the consultant is 
actually making management decisions on behalf of the client's management 
(for example in hiring senior management positions), I would agree that 
auditor independence would be impaired. Second, I have concerns that this 
ruling could negatively impact both the effectiveness of the CPA firm and the 
services received by the client (i.e. higher price and lower quality service 
from multiple service providers). I think this is an even bigger concern if 
similar independence rules eventually apply to the entire public and private 
accounting profession if various state licensing agencies adopt the same rule 
as the proposed SEC rule. Thank you in advance for considering my comments. 
Sincerely, 
     
Steven A. Pullara, CPA
Partner
Smith & Gesteland, LLP
www.sgcpa.com  
     

    Author:   at Internet
Date:    09/20/2000  3:57 PM
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TO: RULE-COMMENTS at 03SEC
Subject: Opposition to S7-13-00
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I wish to oppose the proposed regulation for a variety of reasons. The 
primary concern is that CPA- Auditors should be able to render non-audit 
services to their audit clients as long as there is no impermissible conflict 
of interest or issues relating to a negative impact on the independence of 
the CPA regarding the audit. It is my opinion that such auditor conduct is 
currently adequately regulated by the professional ethical requirements under 
voluntary organizations such as the AICPA, the state accountancy boards and 
related state statutes as well as current SEC pronouncements. In addition, 
tax services are also highly regulated by various agencies including the IRS. 
I believe that the current SEC proposed regulation is over-inclusive and is 
an overreach into this already highly regulated industry. To adopt this 
regulation will inevitably cause a flight of firms leaving the less 
profitable and more high risk area (from legal liability standpoint) of 
auditing in favor of consulting and related services. This will cause a 
higher price to be paid by the shareholders of audited entities in their 
company's effort to seek out qualified auditors who are agreeable to forego 
their consultancy practice in favor of the now more highly regulated audit 
field. 
Sincerely Yours,
Ronald N. Serota CPA
1050 E. Flamingo Rd., Ste. E227
Las Vegas, Nevada
89119

    Author:  "BARBARA TAYLOR"  at Internet
Date:    09/20/2000  4:18 PM
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TO: RULE-COMMENTS at 03SEC
Subject: Re: SEC proposed ruling
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>
>
> S7-13-00_
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> This is crazy - how many different organizations do you need involved in 
> your business?
>

    Author:   at Internet
Date:    09/20/2000  10:04 PM
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TO: RULE-COMMENTS at 03SEC
Subject: File No. S7-13-00
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September 18, 2000
     
Mr. Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C.  20549-0609
     
Re:  File No. S7-13-00
     Revision of the Commission's Auditor Independence Requirements
     
Dear Mr. Katz:
     
I want to offer my support for the changes the Commission is proposing for 
auditor independence.  I commend you and your committee for this initiative 
aimed at improving and modernizing the public accounting profession.
     
My years of experience have taught me that two of the most important 
qualities in our profession are reliability and integrity.  I have also 
learned that perception is often times as important as reality.  The work 
done by public accountants must be both independent and perceived by 
investors and others in the public arena as independent.   Anything that 
compromises that position should not be tolerated as our financial markets, 
indeed our entire business community, rely totally on this position to 
function.
     
I believe auditor independence will be best achieved by curbing the 
proliferation of non-audit services provided by a public accounting firm to 
its audit clients.  I think an outright ban on these non-audit services is 
the only way to guarantee compliance.  There are plenty of non-audit clients 
that audit firms can pursue to provide their non-audit services.
At a minimum, the proposed proxy disclosure requirements will help the 
public understand the relationship an entity has with its public accounting 
firm.
     
There are many non-audit services that could, potentially, impair 
independence.  Certainly any outsourcing of the internal audit function to 
the organization's external auditing firm impairs independence.  But we must 
also look deeper and review the services that are not so obvious in their 
ability to impair independence.  Services such as financial information 
systems design and implementation, appraisal or valuation services, 
actuarial services, human resources and many management functions must also 
be reviewed.  I have always believed that auditors cannot function as a part 
of client management and remain independent.  It is human nature, especially 
when fees are involved.
     
Now is the time to strengthen and modernize our profession and the proposed 
SEC rule amendments regarding auditor independence do just that.  I urge you 
to go forward with these needed changes including the relaxing of 
restrictions on investment and employment imputed to a public accounting 
firm.
     
Thank you and all the Commissioners, I look forward to working under the 
new guidelines.
     
Sincerely,
Brian K. White
CPA - State of Texas