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

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

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


Author: "Brenda Batten" at Internet Date: 09/25/2000 10:55 AM 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. Brenda B. Batten Certified Public Accountant


Author: "Jon Brewer" at Internet Date: 09/25/2000 10:15 AM Normal TO: RULE-COMMENTS at 03SEC CC: "Jon Brewer" at Internet 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 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 Normal TO: RULE-COMMENTS at 03SEC Subject: ------------------------------- 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, Rachel Campbell 22125 Elizabeth SCS, MI 48080


Author: "arthur cobb" at Internet Date: 09/25/2000 2:07 PM Normal TO: RULE-COMMENTS at 03SEC Subject: reference file S7-13-00 ------------------------------- Message Contents 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 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. 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 Normal 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 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, Kim Field, CPA


Author: Fran Foy at Internet Date: 09/22/2000 9:57 AM Normal TO: RULE-COMMENTS at 03SEC Subject: 17 CRF Parts 210 & 240 ------------------------------- Message Contents 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 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. 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 Normal 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 Normal TO: RULE-COMMENTS at 03SEC CC: relliott@kpmg.com at Internet Subject: SEC file # S7-13-00 ------------------------------- Message Contents 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 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.


Author: "Cindy Hulquist" at Internet Date: 09/25/2000 10:44 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. 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 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. 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 Normal TO: RULE-COMMENTS at 03SEC Subject: Reference File No.: S7-13-00 ------------------------------- Message Contents 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 Normal 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


Modified:10/02/2000