September 21, 2000
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609
Re: File No.: S7-13-00
Dear Sirs & Madams:
The SEC has decided to move forward with rule number S7-13-00 prohibiting non-audit services without facts or evidence. Even the SEC admits that non-audit services have neither compromised audit quality nor auditor independence, nor ever have caused an audit failure. None of the studies or reports concluded that the scope of services impaired audits. The SEC's proposed rule is unnecessary overkill.
The SEC proposal is disturbing news for CPAs working in industry, since it would restrict public companies' freedom of choice when seeking outside professional services. The SEC would force public companies to constantly choose whether to hire a firm solely as its auditor or solely as a provider of other services. In fact, under the proposed new rules, a public company might be compelled to dismiss an audit firm that has done consistently outstanding work in order to obtain services from the auditor's non-audit colleagues.
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 nearly half of the market is "off-limits," and the same is true for the best non-audit professionals. Similarly, the best 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.
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. The decision by a government agency to control to this degree is a concern to all, not just accounting professionals. This scope of services rule must not be allowed to go forward.
Very truly yours,
Chief Financial Officer