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: "Brenda Batten" at Internet
Date: 09/25/2000 10:55 AM
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TO: RULE-COMMENTS at 03SEC
Subject: File No. S7-13-00
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I am writing to oppose the SEC's proposed rule governing auditor
independence. As a CPA I take our profession's independence standards and
my responsibilities seriously. There has been no evidence to demonstrate
that non-audit services have compromised audit quality or auditor
independence. It appears that the SEC has ignored the conclusion of the
Panel on Audit Effectiveness of the Public Oversight Board which indicated
the quality of audits are sound.
The SEC has waited until the end of the Clinton Administration to try to
push through a rule to restructure the accounting profession without
sufficient time for comments. There are parts of the proposed rules that
have been long overdue but by tying the more controversial scope of
services initiative to the rules more time is needed for analysis and fact
finding than is available in the SEC's limited time frame.
Brenda B. Batten
Certified Public Accountant
Author: "Jon Brewer" at Internet
Date: 09/25/2000 10:15 AM
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TO: RULE-COMMENTS at 03SEC
CC: "Jon Brewer" at Internet
Subject: "S7-13-00"
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I am writing to you about the proposed federal regulation being initiated by the
SEC that threatens my profession. Specifically, File No S7-13-00.
If this proposal is approved, I fully expect it to find its way to state
regulators across the country, significantly changing the way accounting firms
to business.
The impact of such a change would be widely felt by forcing accounting firms to
limit their clients to either audit or non-audit services. This limitation
would prove to be a disservice to our clients and have a negative financial
impact on our firm. Twenty percent of our current services are audit or audit
related services.
The Panel on Audit Effectiveness of the Public Oversight Board, which was formed
at the request of your organization, recently concluded that there was no
evidence that the provision of non-audit services has hurt audit quality. In
fact, it concluded that both the profession and the quality of audits are
fundamentally sound and that in numerous instances non-audit services
contributed to a more effective audit.
This proposal restricts freedom of choice by limiting the services an accounting
firm can provide. This type of oversight is unwarranted and intrusive.
Jon Brewer
Author: ghd at Internet
Date: 09/25/2000 11:00 AM
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TO: RULE-COMMENTS at 03SEC
Subject:
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I am very concerned over the proposed new rules regarding independence of
auditors auditing SEC clients. Updating the independence rules is probably
warranted, but the sweeping overhaul as proposed goes far beyond anything
that is necessary.
CPAs take their profession's independence standards and the responsibility
to represent the public interest seriously. It's an attribute and
responsibility that defines the profession. Since there's been nothing to
demonstrate any significant problem in this regard, I struggle to figure
out just what is the motivation for the SEC to pursue such a dramatic
change.
There is clearly no need for SEC to intervene between the normal relation
of auditors and their clients with these excessively restrictive
independence rules. I urge SEC to reconsider its position and drop these
proposals.
Sincerely,
Rachel Campbell
22125 Elizabeth
SCS, MI 48080
Author: "arthur cobb" at Internet
Date: 09/25/2000 2:07 PM
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TO: RULE-COMMENTS at 03SEC
Subject: reference file S7-13-00
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to Arthur Levitt-Chairman I have practiced as a certified public
accountant for approximately twenty-five years. I was a partner in Peat,
Marwick, Mitchell & Co. (now KPMG). I sit on the board of directors and am a
member of the audit committee of a small publicly-held company. I strongly
support the SEC's proposed rules which include strengthening independence.
Restrictions of accounting firms' entry into joint ventures, partnerships and
multidisciplinary practices and limitations of the circumstances under which
CPAs can represent their clients before the irs, would enhance independence,
objectivity, and fidelity to the public trust. Sincerely, Arthur H. Cobb
September 25, 2000
Author: "Angela Doell" at Internet
Date: 09/25/2000 11:39 AM
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TO: RULE-COMMENTS at 03SEC
Subject: S7-13-00
------------------------------- Message Contents
I am writing to you about the proposed federal regulation being initiated by the
SEC that threatens my profession. Specifically, File No S7-13-00.
If this proposal is approved, I fully expect it to find its way to state
regulators across the country, significantly changing the way accounting firms
do business.
The impact of such a change would be widely felt by forcing accounting firms to
limit their clients to either audit or non-audit services. This limitation
would prove to be a disservice to our clients and have a negative financial
impact on our firm. Twenty percent of our current services are audit or audit
related services.
The Panel on Audit Effectiveness of the Public Oversight Board, which was formed
at the request of your organization, recently concluded that there was no
evidence that the provision of non-audit services has hurt audit quality. In
fact, it concluded that both the profession and the quality of audits are
fundamentally sound and that in numerous instances non-audit services
contributed to a more effective audit.
This proposal restricts freedom of choice by limiting the services an accounting
firm can provide. This type of oversight is unwarranted and intrusive.
Angela R. Doell, CPA
1400 W Benson Blvd Suite 400
Anchorage, AK 99503
907-272-1571
Author: Ken Dornbrook at Internet
Date: 09/25/2000 1:30 PM
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TO: RULE-COMMENTS at 03SEC
Subject: Proposed SEC Ruling
------------------------------- Message Contents
I am very concerned over the proposed new rules regarding independence of
auditors auditing SEC clients. Updating the independence rules is probably
warranted, but the sweeping overhaul as proposed goes far beyond anything that
is necessary.
CPAs take their profession's independence standards and the responsibility to
represent the public interest seriously. It's an attribute and responsibility
that defines the profession. Since there's been nothing to demonstrate any
significant problem in this regard, I struggle to figure out just what is the
motivation for the SEC to pursue such a dramatic change.
There is clearly no need for SEC to intervene between the normal relation of
auditors and their clients with these excessively restrictive independence
rules. I urge SEC to reconsider its position and drop these proposals.
Sincerely,
Kenneth R. Dornbrook CPA
Godfrey Hammel, Danneels & Co. P.C.
21420 Greater Mack
St Clair Shores, MI 48080
Author: "Kim Field" at Internet
Date: 09/25/2000 3:27 PM
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TO: RULE-COMMENTS at 03SEC
Subject: ref file no S7-13-00
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Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, NW
Washington, D.C. 20549-0609
Reference file No. S7-13-00
Mr. Katz:
I am writing this letter to voice my opposition to the Securities and Exchange
Commission's proposed rules governing auditor independence. The proposed rule is
not only unnecessary, but would also have a devastating effect on our firm and
services required by our many small, privately-owned client businesses.
I am concerned that the new guidelines will severely restrict our firm's ability
to provide these needed non-audit services to our small audit clients. These
sweeping changes are in response to a few "independence" problem encountered
only on "large" audits of publicly held companies.
The Securities and Exchange Commission has based its decision to move forward
with this rule prohibiting non-audit services without facts or evidence. Even
the Securities and Exchange Commission admits that there is no empirical
evidence that non-audit services have compromised audit quality or auditor
independence, nor ever caused an audit failure. None of the studies or reports
cited by the Securities and Exchange Commission concluded that the scope of
services impaired audit effectiveness, or that an exclusionary ban was necessary
or appropriate.
In a rush to regulate, the Securities and exchange commission has limited to 75
days the period for commenting on a far-reaching and highly complex proposal,
including responding to more than 400 questions, collecting and analyzing a
great deal of data and considering alternative concepts for regulating auditor
independence.
In conclusion, the Securities and Exchange Commission's proposal to restrict the
services offered by accounting firms represents a fundamental restructuring of a
profession that has successfully given our local banks and investors the
reliable, independent data they need for the past century. A decision by a
government agency to tell some business organizations what services they may
offer and to tell other businesses from whom they can buy services is an
extraordinary economic intervention without any empirical or other basis.
This scope of services rule must not be allowed to go forward.
Respectfully submitted,
Kim Field, CPA
Author: Fran Foy at Internet
Date: 09/22/2000 9:57 AM
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TO: RULE-COMMENTS at 03SEC
Subject: 17 CRF Parts 210 & 240
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I support the proposed Revision of the Commission's Auditor Independence
Requirements.
Sincerely,
Frances Foy, CPA, CIA
Author: "Ron Greisen" at Internet
Date: 09/25/2000 11:33 AM
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TO: RULE-COMMENTS at 03SEC
Subject: S7-13-00
------------------------------- Message Contents
I am writing to you about the proposed federal regulation being initiated by the
SEC that threatens my profession. Specifically, File No S7-13-00.
If this proposal is approved, I fully expect it to find its way to state
regulators across the country, significantly changing the way accounting firms
do business.
The impact of such a change would be widely felt by forcing accounting firms to
limit their clients to either audit or non-audit services. This limitation
would prove to be a disservice to our clients and have a negative financial
impact on our firm. Twenty percent of our current services are audit or audit
related services.
The Panel on Audit Effectiveness of the Public Oversight Board, which was formed
at the request of your organization, recently concluded that there was no
evidence that the provision of non-audit services has hurt audit quality. In
fact, it concluded that both the profession and the quality of audits are
fundamentally sound and that in numerous instances non-audit services
contributed to a more effective audit.
This proposal restricts freedom of choice by limiting the services an accounting
firm can provide. This type of oversight is unwarranted and intrusive.
Ronald E. Greisen, CPA, ABV
1400 W Benson Blvd Suite 400
Anchorage, AK 99503
907-272-1571
Author: Dick Hammel at Internet
Date: 09/25/2000 11:47 AM
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TO: RULE-COMMENTS at 03SEC
Subject: reference file #S7-13-00
------------------------------- Message Contents
September 25, 2000
Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609
Dear Mr. Katz:
On behalf of the partners and employees of my firm, I wish to take this
opportunity to offer our opinion regarding the proposed Securities Exchange
Commission (SEC) regulation "Revision of the Commission's Auditor
Independence Requirements; Proposed Rule, 65 Fed. 43, 148 (2000)," (the
proposal). This opinion is offered prior to the close of the proposal
comment period, which expires September 25, 2000.
Our opinion is offered with a willingness to assist and to communicate our
concerns to you regarding the proposal. We firmly believe the proposal, as
currently written, is unwarranted, not supported by facts, or requested by
the financial and business community we both serve. Non-audit services
offered by audit firms simply have not compromised auditor independence or
audit failure. We offer and believe the following support our position
concerning the proposal.
* Audit firms are aware of, have a positive attitude towards, and have
an excellent record of adherence to the independence rules -
Audit firms have an excellent history, awareness and
attitude of maintaining, observing and adhering to the Independence Rules.
Audit firms are well aware of the Independence Rules in regard to non-audit
services offered by audit firms. The Independence Rules are the first and
most understood rules of audit firms. The Independence Rules for audit firms
are the first rules within the Code of Ethics and the first functional area
referenced in the Quality Control Standards as promulgated by the AICPA.
There cannot be any misunderstanding concerning the importance of the
Independence Rules by audit firms or the public.
* There is no empirical evidence to support the SEC's position -
We cannot see a problem concerning audit firms violating the
Independence Rules as they relate to non-audit services. We are curious
what facts and circumstances were used by the Commission to determine that
the "Scope of Services" offered by audit firms has resulted in substandard
engagements through financial and auditing standards violations, since even
the SEC admits that there is no empirical evidence that non-audit services
have compromised audit quality or auditor independence, or even caused an
audit failure. None of the studies or reports cited by the SEC concluded
that the scope of services impaired audit effectiveness, or that an
exclusionary ban was necessary or appropriate. We do not believe there is
factual support for the need for such a dramatic change relevant to the
"Scope of Services" offered by audit firms.
* The SEC's own work supports positions counter to it's proposal -
In the last 10 annual reports to Congress, the SEC has not
mentioned any concerns regarding the "Scope of Services" offered by audit
firms. Where has this concern originated? It appears to us that the SEC has
ignored the conclusions of the SEC's Panel of Audit Effectiveness of the
Public Oversight Board. This SEC appointed panel concluded, "both the
profession and the quality of audits are fundamentally sound." The Panel
did not find any evidence that the provision of non-audit services
negatively impacted audit quality. In fact, quite the opposite - the Panel
instead noted that "in numerous instances non-audit services contributed to
a more effective audit."
* The proposal is far too restrictive and will undermine the
profession to the detriment of the public-
The proposal greatly restricts the ability of the public to
benefit from the knowledge possessed by audit firms. The financial and
business community will be forced to undertake procedures which are highly
inefficient and costly in both time and expense to procure needed non-audit
services from those that simply do not have the knowledge and understanding
possessed by an audit firm. Public companies' freedom of choice in
selecting outside professional services will be restricted. The SEC will be
forcing public companies to constantly choose whether to hire a firm solely
as its auditor or solely as a provider of these other services, when the
audit firm may be the best provider for both.
In that same regard, the proposal's broad restriction on
non-audit services will in itself, undermine auditor independence by making
audit firms too reliant and dependent on audit fees. This dependence by
audit firms on audit fees would not serve the public interest.
Although the proposal does clearly state that it "would not
effect tax-related services" provided by audit firms to audit clients and
references only compliance services provided by audit firms to audit
clients, it would prohibit an audit firm from acting as an advocate for an
audit client, providing expert service in administrative proceedings, and
logically prohibit audit firms from representing audit clients before the
Internal Revenue Service.
* The proposal would place undue prohibitions on employment and
commerce -
The proposal would create a negative effect on the ability
of audit firms to recruit and retain the best talent. Professionals would not
be interested in or challenged to work with firms in which 25% - 40% of the
current market would not open to them to practice. This prohibition
concerning the ability of professionals to perform either audit or non-audit
services within a firm would limit the attractiveness of firms. Simply put,
the best will elect to enter a profession in which their ability to perform
would not be limited.
The proposal prohibits audit firms from entering into almost
any joint venture or partnership with any entity that may offer non-audit
services to the audit firm's audit client. In addition, this proposal also
prohibits an audit firm from participating in beneficial economic activities
and business relationships. These independent, legal and sound relationships
would be prohibited because the entities participating would be treated as
"affiliates of the audit firm."
The proposal will place new independence requirements
between audit firm members within regional alliances, associations and
cooperative agreements with respect to the audit clients of each other.
* The SEC has not fully considered the far reaching consequences of
it's actions -
The impact to all audit firms, regardless of having SEC
audit clients or not, will be dramatic. Other regulators will use the
proposal, if adopted, as a model. State boards of accountancy, other
federal regulators, (i.e., banking and ERISA areas of audit practice) and
other regulators may use this "model".
We believe the significant impact of this proposal requires the SEC to
reconsider the timing and nature of the process, and ask that the SEC not
act in haste on such an important subject. We believe the SEC is falling
out of step with the larger community and ask you to consider the following:
* The 75-day comment period is entirely too short to permit meaningful
and timely public input. This short comment period does not permit
collecting and analyzing the huge amount of data required, nor does it
provide enough time to formulate meaningful and viable alternatives for
regulating the "Scope of Services" offered by audit firms.
* Three years ago the SEC set up the Independence Standards Board
(ISB). We believe the work of the ISB is being pre-empted by this proposal.
The ISB, as originally charged by the SEC, was to develop new concepts and
framework regarding auditor independence and related implementation.
* Recently, the ISB, NYSE, NASD, American Stock Exchange and the SEC
have adopted new disclosure and audit committee requirements. This proposal
and its timetable have not given enough time for those requirements to
mature and work.
* The proposal's timetable has been presented in the last days of the
current Presidential administration. The lateness within this
administration, and the limit on public input, will not provide opportunity
for input from Congress and the new administration.
In addition, we must question the authority of the SEC in regard to this
"Scope of Services" rule. The authority cited by the SEC in the proposal
pertains to the filing of public companies' financial statements that have
been audited by independent audit firms. This authority does not provide for
making rules that govern and regulate the audit profession itself. The
proposed rules clearly concern the "appearance of independence." The
proposal neglects to address any issues, facts or circumstances concerning
the additional requirement concerning independence "fact." Since inception,
the independence rules have been defined by an auditor's independence in
regard to "appearance and fact." We question whether the SEC has statutory
authority to impose restrictions because of possible "perceptions" about
lack of independence.
In as much as this proposal is a fundamental change to one of the most basic
and observed rules of the audit profession, we urge the Commission to defer
its adoption to afford more time for input from the CPA profession, public
entities, and other interested parties. And, as previously stated, we will
be pleased to work with the Commission in this matter.
Thank you for your consideration.
Sincerely,
Richard W. Hammel, CPA
Hammel & Company, P.C.
Author: at Internet
Date: 09/25/2000 3:10 PM
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TO: RULE-COMMENTS at 03SEC
CC: relliott@kpmg.com at Internet
Subject: SEC file # S7-13-00
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The subject SEC proposal to prohibit independent auditors of SEC registrants
from participating in certain non-audit activities which have the potential
to be a conflict of interest or the potential to impair their independence is
an excellent proposal and long over due.
I am a retired managing partner of a large local CPA firm in Buffalo, New
York. Before I retired, I had the privilege of serving as the chairman of an
international group of medium to large sized CPA firms whose members included
CPA firms throughout the United States, the Americas, Europe, Asia and
Australia.
Most members of the AICPA who are engaged in the practice of public
accountancy are sole practitioners or either partners or associates in
independent CPA firms. These people are hard working professionals who are
very busy providing professional services to their clients and attempting to
keep current with the endless pronouncements from various professional
sources. During the past several years, while most of the AICPA members have
been concentrating on serving clients and keeping current, the AICPA
President, Barry Melancon, his appointed cadre and national firm surrogates
who have been "elected" to chair the AICPA have hijacked the profession from
its own members.
These "leaders" of our profession have deliberately ignored the most basic of
the generally accepted auditing standards - independence. Perhaps the most
important general auditing standard is that the CPA must be independent both
in fact and in appearance. The public often takes this standard for granted
but it's the perception of independently audited financial statements that
allows financial transactions to flow freely and quickly among organizations
and individuals who have no first hand knowledge of each other.
It doesn't take a CPA or a Ph.D. in finance to know that an audit conducted
by a firm or individuals who are somehow related to the transactions being
audited is tainted. Obviously when a person audits himself, the result is
useless. Perception is reality! Lee Harvey Oswald may have acted alone when
he assassinated President John F. Kennedy but if most Americans believe that
the assassination was a conspiracy, then as far as they are concerned, that's
what it was.
An audit of financial statements relies heavily on the system of internal
control. When virtually every organization is widely using computerization
and communications, the reliance on internal control is even more important
than ever before. If the auditor or some of his colleagues developed the
system of internal control, how can the auditor appear to be independent?
The perception of potential impairment of independence also applies to the
other nine categories of non audit services which are covered in the subject
proposed rules. I'm particularly amused and at the same time offended to read
the "Chair's Corner" in the September issue of The CPA Letter which was
written by AICPA Chair Robert K. Elliott. The purpose of the article was to
rally the troops to respond to the SEC objecting to the proposed rules by
telling members, among other things, that: "If we succeed, we will better
serve the public interest and bequeath to our successors a profession
strengthened, ennobled and invigorated rather than enervated, demoralized and
diminished."
What nonsense! How is the public interest served when the "independent"
auditor is also acting as investment banker in a merger of his audit client
or taking her audit client public? How is the public interest served when the
auditor also provides executive placement services for his audit client and
the CEO or CFO are perceived to have a quid pro quo with the auditor?
Bookkeeping, decision making and supervisory functions have been considered
verboten in the auditing literature regarding auditor's independence for at
least thirty years and probably more.
I hope the SEC will look through the AICPA's transparent assertions that "the
very future of the CPA profession is on the line" and ignore their objections
to the subject proposed rules. The only futures on the line are those that
hijacked the AICPA and are determined to convert the practice of public
accountancy into a Walmart of financial services -- one stop shopping.
In AICPA Chair Robert K. Elliott's article mentioned above, his remarks are
quite telling and I do not believe they represent the overwhelming majority
of CPAs practicing public accounting. He writes that "regulatory forces would
confine us to the licensed function." Will regulatory forces prevail and
reduce us effectively to statutory auditors?" The leadership of the AICPA
clearly have no respect for auditing and they look upon auditing with
disdain. Frequently audit fees are substantially discounted for the purpose
of getting an opportunity to sell other services to a new client. They
apparently believe some of the old jokes about green eye shaded bean
counters. Many CPA firms don't even use the word auditing (like it's a
plague) in their advertising. Instead of the AICPA educating the public about
the value of audited financial statements and how audits protect the public,
the AICPA ignores it hoping nobody brings up that nasty word. The AICPA would
rather spend their limited advertising budget in a sophomorish attempt
promoting services that are available from many other sources. They forget
that taxpayers, investors, creditors, etc., have confidence in institutions
to a large extent because of the independent audit. Isn't it interesting that
auditing, the only service for which CPAs have a monopoly, is often
discounted so that CPAs can attempt to sell other services which are also
offered by a myriad of other professionals?
Perhaps the most amusing line in Mr. Elliott's article which tells it all is
his statement that "Market forces, rooted in technology, make old regulations
obsolete." Is he writing about old regulations like independence,
objectivity, integrity, honesty? Obsolete?
Much of the AICPA spin refers to serving the public interest. Clearly that is
simply insincere marketing jargon. Is the public interest best served by
auditing which is independent in fact and in appearance or by offering a
potpourri of loosely related services which are offered elsewhere?
Perhaps the market is ahead of all of us. According to the financial media,
Arthur Anderson has spun off Anderson Consultants and Price Waterhouse
Coopers is negotiating to sell its consulting business to Hewlett Packard.
In case I haven't made myself clear, I vote solidly in favor of the subject
proposed rules!
Martin S. Harris, CPA
525 Coral Drive
Cape Coral, Florida 33904-5907
(941) 540-4383
Author: "Joan Henry" at Internet
Date: 09/25/2000 10:08 AM
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TO: RULE-COMMENTS at 03SEC
Subject: S7-13-00
------------------------------- Message Contents
I am writing to you about the proposed federal regulation being initiated by the
SEC that threatens my profession. Specifically, File No S7-13-00.
If this proposal is approved, I fully expect it to find its way to state
regulators across the country, significantly changing the way accounting firms
do business.
The impact of such a change would be widely felt by forcing accounting firms to
limit their clients to either audit or non-audit services. This limitation
would prove to be a disservice to our clients and have a negative financial
impact on our firm. Twenty percent of our current services are audit or audit
related services.
The Panel on Audit Effectiveness of the Public Oversight Board, which was formed
at the request of your organization, recently concluded that there was no
evidence that the provision of non-audit services has hurt audit quality. In
fact, it concluded that both the profession and the quality of audits are
fundamentally sound and that in numerous instances non-audit services
contributed to a more effective audit.
This proposal restricts freedom of choice by limiting the services an accounting
firm can provide. This type of oversight is unwarranted and intrusive.
Author: "Cindy Hulquist" at Internet
Date: 09/25/2000 10:44 AM
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TO: RULE-COMMENTS at 03SEC
Subject: S7-13-00
------------------------------- Message Contents
I am writing to you about the proposed federal regulation being initiated by the
SEC that threatens my profession. Specifically, File No S7-13-00.
If this proposal is approved, I fully expect it to find its way to state
regulators across the country, significantly changing the way accounting firms
do business.
The impact of such a change would be widely felt by forcing accounting firms to
limit their clients to either audit or non-audit services. This limitation
would prove to be a disservice to our clients and have a negative financial
impact on our firm. Twenty percent of our current services are audit or audit
related services.
The Panel on Audit Effectiveness of the Public Oversight Board, which was formed
at the request of your organization, recently concluded that there was no
evidence that the provision of non-audit services has hurt audit quality. In
fact, it concluded that both the profession and the quality of audits are
fundamentally sound and that in numerous instances non-audit services
contributed to a more effective audit.
This proposal restricts freedom of choice by limiting the services an accounting
firm can provide. This type of oversight is unwarranted and intrusive.
Sincerely,
Cindy L. Hulquist, CPA, Manager
Thomas, Head & Greisen, CPA's
1400 W. Benson Blvd., Suite 400
Anchorage, Alaska 99503
Author: "David Huntoon" at Internet
Date: 09/25/2000 10:22 AM
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TO: RULE-COMMENTS at 03SEC
Subject: File No. S7-13-00
------------------------------- Message Contents
I am writing to oppose the SEC's proposed rule governing auditor
independence. As a CPA I take our profession's independence standards and
my responsibilities seriously. There has been no evidence to demonstrate
that non-audit services have compromised audit quality or auditor
independence. It appears that the SEC has ignored the conclusion of the
Panel on Audit Effectiveness of the Public Oversight Board which indicated
the quality of audits are sound.
The SEC has waited until the end of the Clinton Administration to try to
push through a rule to restructure the accounting profession without
sufficient time for comments. There are parts of the proposed rules that
have been long overdue but by tying the more controversial scope of
services initiative to the rules more time is needed for analysis and fact
finding than is available in the SEC's limited time frame.
David L. Huntoon, CPA
Balbirer & Coleman, PLLC
100 Europa Drive, Suite 445
Chapel Hill, NC 27514
(919) 968-4911
(919) 967-2813 fax
Author: "Steven R. Imler; CPA" at Internet
Date: 09/25/2000 10:49 AM
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TO: RULE-COMMENTS at 03SEC
Subject: Reference File No.: S7-13-00
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Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609
Reference File No.: S7-13-00
Dear Mr. Katz:
We are writing to you regarding the SEC Proposal Limiting the Scope of CPA
Services, Reference File No.: S7-13-00. Our firm does not deal with
publicly-held clients, however the proposed rule will more than likely have
an adverse effect on our practice and the industry as a whole. Given that
rules promulgated by the SEC tend to set the standard for the industry,
other regulators will soon adopt these rules as well.
Our primary concern is that our clients view their accountants as trusted
business advisors and consultants. By prohibiting the providing of certain
non-audit services to audit clients, accountants will be severely limited
in their ability to serve their clients. An inefficiency would result
since many of the services provided are the result of an audit and such
services can be used as a tool in performing an audit. Besides reducing an
accounting firm's revenues, the client will also incur additional expense
because of the need for two or more audit/accounting firms.
There has been no compelling evidence to suggest that providing multiple
services to an audit client impairs independence in an audit. If this rule
is implemented, it is likely that accounting firms would opt to no longer
provide auditing services resulting in the pool of available auditors
decreasing considerably. This would in turn drive up the price of
obtaining an audit, and probably lower the quality of audits because
quality business advisor and consultant firms will no longer provide them.
We ask you to please evaluate the results from your panel discussions this
week. If independence is still a concern, please look to other ways to
establish controls rather than limiting the valuable services we provide to
our clients. Thank you for your time and consideration.
Sincerely,
Steven R. Imler, CPA
Ent & Imler CPA Group, PC
Author: "John Jakuszanek" at Internet
Date: 09/25/2000 10:22 AM
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TO: RULE-COMMENTS at 03SEC
Subject: Proposed SEC Ruling
------------------------------- Message Contents
I am very concerned over the proposed new rules regarding independence of
auditors auditing SEC clients. Updating the independence rules is probably
warranted, but the sweeping overhaul as proposed goes far beyond anything
that is necessary.
CPAs take their profession's independence standards and the responsibility
to represent the public interest seriously. It's an attribute and
responsibility that defines the profession. Since there's been nothing to
demonstrate any significant problem in this regard, I struggle to figure out
just what is the motivation for the SEC to pursue such a dramatic change.
There is clearly no need for SEC to intervene between the normal relation of
auditors and their clients with these excessively restrictive independence
rules. I urge SEC to reconsider its position and drop these proposals.
Sincerely,
John M. Jakuszanek CPA
Godfrey Hammel, Danneels & Co. P.C.
21420 Greater Mack
St. Clair Shores MI 48080
Author: "Bill Johnson" at Internet
Date: 09/25/2000 3:06 PM
Normal
TO: RULE-COMMENTS at 03SEC
Subject: ref file no S7-13-00
------------------------------- Message Contents
Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, NW
Washington, D.C. 20549-0609
Reference file No. S7-13-00
Mr. Katz:
I am writing this letter to voice my opposition to the Securities and Exchange
Commission's proposed rules governing auditor independence. The proposed rule is
not only unnecessary, but would also have a devastating effect on our firm and
services required by our many small, privately-owned client businesses.
I am concerned that the new guidelines will severely restrict our firm's ability
to provide these needed non-audit services to our small audit clients. These
sweeping changes are in response to a few "independence" problem encountered
only on "large" audits of publicly held companies.
The Securities and Exchange Commission has based its decision to move forward
with this rule prohibiting non-audit services without facts or evidence. Even
the Securities and Exchange Commission admits that there is no empirical
evidence that non-audit services have compromised audit quality or auditor
independence, nor ever caused an audit failure. None of the studies or reports
cited by the Securities and Exchange Commission concluded that the scope of
services impaired audit effectiveness, or that an exclusionary ban was necessary
or appropriate.
In a rush to regulate, the Securities and exchange commission has limited to 75
days the period for commenting on a far-reaching and highly complex proposal,
including responding to more than 400 questions, collecting and analyzing a
great deal of data and considering alternative concepts for regulating auditor
independence.
In conclusion, the Securities and Exchange Commission's proposal to restrict the
services offered by accounting firms represents a fundamental restructuring of a
profession that has successfully given our local banks and investors the
reliable, independent data they need for the past century. A decision by a
government agency to tell some business organizations what services they may
offer and to tell other businesses from whom they can buy services is an
extraordinary economic intervention without any empirical or other basis.
This scope of services rule must not be allowed to go forward.
Respectfully submitted,
William G. Johnson, CPA
Author: "LeFevre; Roberta Sills" at Internet
Date: 09/25/2000 9:43 AM
Normal
Receipt Requested
TO: RULE-COMMENTS at 03SEC
Subject: Res[onse to SEC sweeping rules
------------------------------- Message Contents
I wish to express my full support for the Commission's "sweeping rules". It
is a first step in restoring independence and, therefore, public confidence
in published financial statements and the auditors' opinions on these
statements. Thank you for addressing these critical issues.
Roberta LeFevre, CPA
Senior Internal Auditor
University of Miami
rlefevre@miami.edu
Office (305) 284-2605
FAX (305) 284-2612
Author: "Cathy Lorenz" at Internet
Date: 09/25/2000 11:23 AM
Normal
TO: RULE-COMMENTS at 03SEC
TO: at Internet
TO: at Internet
Subject: SEC Proposal
------------------------------- Message Contents
I am very concerned over the proposed new rules regarding independence of
auditors auditing SEC clients. Updating the independence rules is probably
warranted, but the sweeping overhaul as proposed goes far beyond anything
that is necessary.
I and my fellow CPA's take our profession's independence standards and the
responsibility to represent the public interest seriously. It's an attribute
and responsibility that defines our profession. Since there's been nothing
to demonstrate any significant problem in this regard, I struggle to figure
out just what is the motivation for the SEC to pursue such a dramatic
change.
There is clearly no need for SEC to intervene between the normal relation of
auditors and our clients with these excessively restrictive independence
rules. I urge SEC to reconsider its position and drop these proposals.
Sincerely,
Cathleen S. Lorenz, CPA, MST
21420 Greater Mack Ave
St Clair Shores, MI 48080
(810)772-8100
Author: "Deborah Maphis" at Internet
Date: 09/25/2000 10:34 AM
Normal
TO: RULE-COMMENTS at 03SEC
Subject: Fw: s7-13-00
------------------------------- Message Contents
----- Original Message -----
From: Deborah Maphis
To: AURTHUR LEVITT
Sent: Monday, September 25, 2000 9:47 AM
Subject: Commission's Rule on Auditor Independence
I am a small practioner. I do very little audit work and what I do is for small
business. Although I do no SEC work, I can see that the rules proposed will
cause a reduction in competition and an increase in costs for business, which in
turn increases costs of products and services to consumers. The audit work I am
exposed to always involves some fixing of problem areas. I the client would
have to go to another CPA to fix the problem so I could come back to check it
the cost of the "fix" would be substantially more. Also the tem legal services
is vague. I perform services that lawyers do as well as CPA's. I represent
them in IRS and State taxing authority cases, so do lawyers, I help or prepare
minuites and do estate planning and assist with bankruptcy planning. Are these
legal services? I do not file paperwork with the courts, so does that become the
criteria?
It is also my understanding that there is much opposition to this proposal from
the AICPA. That should be an indication there there should be a closer meeting
of the minds.
It is also my understanding that the individual state boards are looking to
adopt similar standards that come from this proposal. In the event this
succeeds It would drive up the cost of audit work and force companies to most
likely have to consistiently engage two CPA's. Once again cost to small
business would be the highest and would have even more impact to the consumer if
the rules you proposed float down to the non SEC level.
Author: "Martinez; Paul" at Internet
Date: 09/25/2000 8:19 AM
Normal
Receipt Requested
TO: RULE-COMMENTS at 03SEC
Subject: File No. S7-13-00
------------------------------- Message Contents
I support the proposal.
Paul A. Martinez
Audit Services
Mail Stop: SCB01
Ext. 3250
Author: "Debra Mason" at Internet
Date: 09/25/2000 11:30 AM
Normal
TO: RULE-COMMENTS at 03SEC
Subject: S7-13-00
------------------------------- Message Contents
I am writing to you about the proposed federal regulation being initiated by the
SEC that threatens my profession. Specifically, File No S7-13-00.
If this proposal is approved, I fully expect it to find its way to state
regulators across the country, significantly changing the way accounting firms
do business.
The impact of such a change would be widely felt by forcing accounting firms to
limit their clients to either audit or non-audit services. This limitation
would prove to be a disservice to our clients and have a negative financial
impact on our firm. Twenty percent of our current services are audit or audit
related services.
The Panel on Audit Effectiveness of the Public Oversight Board, which was formed
at the request of your organization, recently concluded that there was no
evidence that the provision of non-audit services has hurt audit quality. In
fact, it concluded that both the profession and the quality of audits are
fundamentally sound and that in numerous instances non-audit services
contributed to a more effective audit.
This proposal restricts freedom of choice by limiting the services an accounting
firm can provide. This type of oversight is unwarranted and intrusive.
Debra K. Mason, CPA
1400 W Benson Suite 400
Anchorage, AK 99503
907-272-1571
Author: Dan Naragon at Internet
Date: 09/25/2000 10:31 AM
Normal
TO: RULE-COMMENTS at 03SEC
CC: Gary Bolinger at Internet
Subject: File # S 7-13-00
------------------------------- Message Contents
To whom it may concern ... my firm does not perform any audits ... but does
provide attest services in the form of Compilations and Reviews. Per
information in the media as well as from the AICPA, I believe the SEC's
current rampage to be premature and ill-conceived by SEC Chairman
Levitt. In particular I believe the following points to be valid and with
merit ... and as such request your consideration in this very important issue.
· The SEC has based its decision to move forward with this rule
prohibiting non-audit services without facts or evidence. Even the SEC
admits that there is no empirical evidence that non-audit services have
compromised audit quality or auditor independence, nor ever caused an audit
failure. None of the studies or reports cited by the SEC concluded that the
scope of services impaired audit effectiveness, or that an exclusionary ban
was necessary or appropriate. The SEC's proposed rule is a solution in
search of a problem.
· The SEC ignored the conclusion of the current Panel on Audit
Effectiveness of the Public Oversight Board, a panel that was formed at the
request of the SEC. The panel concluded that, "both the profession and the
quality of audits are fundamentally sound." The panel said it could find no
evidence that the provision of non-audit services has hurt audit quality.
On the contrary, it concluded that in numerous instances non-audit services
contributed to a more effective audit.
· Most dangerous for the accounting profession, and in particular my
firm, is the likely prospect that the proposed rule would set a precedent
for other regulators. Even accounting firms that do not audit SEC
registrants could be impacted by these new rules. The proposed SEC rule
would be viewed as the new model by state boards of accountancy, as well as
federal (e.g., banking and ERISA) and other regulators. These new proposed
SEC rules could influence the regulatory approach to auditor independence
outside the United States as well.
· The SEC claims its proposed rule "would not affect tax-related
services" to audit clients. However, it would ban acting as an advocate for
an audit client, or providing expert services in administrative
proceedings, thus (except in preparing returns) potentially prohibiting
CPAs from representing audit clients before the IRS.
· The proposed rule would impute to an accounting firm the activities
of virtually any entity with which the accounting firm has a commercially
valuable business relationship by viewing such an entity as an "affiliate of
the accounting firm."
· In a rash to regulate, the SEC has:
Adopted a schedule designed to avoid Congressional oversight and
preclude meaningful public participation.
Waited until the eleventh hour of the Clinton Administration to
push through a radical rule to restructure the accounting profession,
without permitting informed oversight, or policy participation, by
Congress or the new Administration. In each of the last 10 annual
reports to Congress, the SEC has not mentioned any concerns about the
scope of services issue.
Limited to 75 days the period for commenting on a far-reaching and
highly complex proposal, including responding to more than 400
questions, collecting and analyzing a great deal of data and considering
alternative concepts for regulating auditor independence.
Pre-empted the work of the ISB, set up three years ago at the
initiative of the SEC to develop a new conceptual framework for auditor
independence and appropriate implementing standards.
Not allowed time for important recent reforms to work, including
new disclosure and audit committee requirements adopted by the ISB, the
NYSE, the NASD, the American Stock Exchange and the SEC.
· The SEC has needlessly tied its popular and long-overdue
modernization of family disqualification rules --depression-era rules that
discriminate against working women and two-career families--to its far more
controversial scope of services initiative. Modernization of the
financial-interest standards can and should occur on an expedited basis,
independent of the scope of services initiative. The scope of services
initiative requires more time for fact finding and analysis than provided
by the SEC's time frame.
· If the rule is adopted, there will be a negative effect on
recruiting and retention of the best talent. The best audit professionals
will not want to be at a firm where 25% -40% of the market is "off-limits,"
and the same is true for the best non-audit professionals. Similarly, the
best and brightest students will not be drawn to firms with a limit on
upward opportunities. The "audit-only" firms endorsed by the proposal will
have difficulty attracting the necessary talent both from accounting
programs and from information technology programs, because the best talent
will be drawn toward industries with broader career opportunities.
· Broad restrictions on non-audit services will likely have the
perverse effect of undermining auditor independence by making audit firms
overly or exclusively dependent on auditing fees, which would certainly be
contrary to the public interest. Such restrictions will also harm the
recruitment and retention of the most qualified personnel, causing a
possible degradation in audit quality.
· In conclusion, the SEC's proposal to restrict the services offered
by accounting firms represents a fundamental restructuring of a profession
that has successfully given investors the reliable, independent data they
need for the past century. A decision by a government agency to tell some
business organizations what services they may offer and to tell other
businesses from whom they can buy services is an extraordinary economic
intervention without any empirical or other basis. We think most Americans
would find this a curious public policy position for their government to take.
This scope of services role must not be allowed to go forward.
Thank you for this opportunity to comment.
Daniel P Naragon, CPA
Naragon & Purdy, Inc., CPAs
PO Box 125
North Manchester, IN 46962-0125
219-982-9500
Author: "Brenda Overbay" at Internet
Date: 09/25/2000 2:09 PM
Normal
TO: RULE-COMMENTS at 03SEC
Subject: SEC PROPOSAL
------------------------------- Message Contents
I am very concerned over the proposed new rules regarding independence of
auditors auditing SEC clients. Updating the independence rules is probably
warranted, but the sweeping overhaul as proposed goes far beyond anything that
is necessary.
CPAs take their profession's independence standards and the responsibility to
represent the public interest seriously. It's an attribute and responsibility
that defines the profession. Since there's been nothing to demonstrate any
significant problem in this regard, I struggle to figure out just what is the
motivation for the SEC to pursue such a dramatic change.
There is clearly no need for SEC to intervene between the normal relation of
auditors and their clients with these excessively restrictive independence
rules. I urge SEC to reconsider its position and drop these proposals.
Sincerely,
Brenda J. Overbay
4743 Campbell
Dearborn Heights, MI 48125
Author: "Evelyn Pardee" at Internet
Date: 09/25/2000 11:39 AM
Normal
Receipt Requested
TO: RULE-COMMENTS at 03SEC
Subject: Re: File No S7-13-00
------------------------------- Message Contents
I am writing to oppose the SEC's proposed rule governing auditor
independence. As a CPA, I take our profession's independence standards and
my responsibilities seriously. There has been no evidence to demonstrate
that non-audit services have compromised audit quality or auditor
independence. It appears that the SEC has ignored the conclusion of the
Panel on Audit Effectiveness of the Public Oversight Board which indicated
the quality of audits are sound.
The SEC has waited until the end of the Clinton Administration to try to
push through a rule to restructure the accounting profession without
sufficient time for comments. There are parts of the proposed rules that
have been long overdue, but, by tying the more controversial scope of
services initiative to the rules, more time is needed for analysis and fact
finding than is available in the SEC's limited time frame.
Evelyn Pardee, CPA
Author: "Bill Schmid" at Internet
Date: 09/25/2000 11:02 AM
Normal
TO: RULE-COMMENTS at 03SEC
Subject: Comments concerning S7-13-00
------------------------------- Message Contents
The proposed federal regulation, File No S7-13-00, being initiated by the SEC
threatens my profession.
If this proposal is approved, I expect it to find its way to state regulators,
significantly changing the way accounting firms do business nationwide.
The impact of such a change would be felt by forcing accounting firms to limit
their clients to either audit or non-audit services. This limitation would be a
disservice to our clients and have a tremendous negative financial impact on our
firm. Twenty percent of our current services are audit or audit related
services.
The Panel on Audit Effectiveness of the Public Oversight Board, which was formed
at the request of your organization, recently concluded that there was no
evidence that the provision of non-audit services has hurt audit quality. In
fact, it concluded that both the profession and the quality of audits are
fundamentally sound and that in numerous instances non-audit services
contributed to a more effective audit.
This proposal restricts freedom of choice by limiting the services an accounting
firm can provide. This type of oversight is unwarranted and intrusive.
Sincerely,
William J. Schmid, CPA
Thomas, Head & Greisen
Author: "Paige" at Internet
Date: 09/25/2000 2:13 PM
Normal
TO: RULE-COMMENTS at 03SEC
Subject: File No S7-13-00
------------------------------- Message Contents
I am writing to oppose the SEC's proposed rule governing auditor
independence. As a CPA I take our profession's independence standards and
my responsibilities seriously. There has been no evidence to demonstrate
that non-audit services have compromised audit quality or auditor
independence. It appears that the SEC has ignored the conclusion of the
Panel on Audit Effectiveness of the Public Oversight Board which indicated
the quality of audits are sound.
The SEC has waited until the end of the Clinton Administration to try to
push through a rule to restructure the accounting profession without
sufficient time for comments. There are parts of the proposed rules that
have been long overdue but by tying the more controversial scope of
services initiative to the rules more time is needed for analysis and fact
finding than is available in the SEC's limited time frame.
Paige H. Winslow, CPA
Author: Sherman W Young at Internet
Date: 09/25/2000 1:34 PM
Normal
TO: RULE-COMMENTS at 03SEC
Subject: Re: File No.S7-13-00
------------------------------- Message Contents
Please do NOT prohibit a CPA firm from providing audit and non-audit
services to the same client. I have no SEC clients, but, since states often
adopt SEC rulings, this may put me out of business. I need the income from
my accounting practice very much. It is a very small practice, but, I
believe that I may be negatively impacted.
Author: "Joanne Zimmer" at Internet
Date: 09/25/2000 10:20 AM
Normal
Receipt Requested
TO: RULE-COMMENTS at 03SEC
Subject: Re: File No. S7-13-00
------------------------------- Message Contents
I am writing to oppose the SEC's proposed rule governing auditor
independence. As a CPA I take our profession's independence standards and
my responsibilities seriously. There has been no evidence to demonstrate
that non-audit services have compromised audit quality or auditor
independence. It appears that the SEC has ignored the conclusion of the
Panel on Audit Effectiveness of the Public Oversight Board which indicated
the quality of audits are sound.
The SEC has waited until the end of the Clinton Administration to try to
push through a rule to restructure the accounting profession without
sufficient time for comments. There are parts of the proposed rules that
have been long overdue but by tying the more controversial scope of
services initiative to the rules more time is needed for analysis and fact
finding than is available in the SEC's limited time frame.
JOANNE MARY ZIMMER, CPA
http://www.sec.gov/rules/proposed/s71300/0925b01.htm
