September 25, 2000

Chairman Arthur Levitt
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609

Re: File No.: S7-13-00

Dear Chairman Levitt:

By now you have heard substantial testimony and received numerous letters of comment on the Securities and Exchange Commission's ("SEC" or "Commission") Revision of the Commissions's Auditor Independence Requirements. I am strongly opposed to the provisions of the proposed rule making that will place restrictions on the scope of non-audit services firms may offer to SEC registrants on the following grounds:

1. The SEC has not put forth any empirical evidence to support the need for such radical changes. It has been reported that, while the SEC recognizes that there is no empirical evidence that non-audit services cause any impairment in audit effectiveness, the basis for the proposal is a "common sense" hypothesis that there must be a problem; yet the Commission ignores the "common sense" hypothesis that an audit firm would not risk damage to its reputation for any sake. Reputation of a professional services firm is a most valuable asset. You surely understand the damage that is caused whenever an audit firm is associated in any way with a company that is required to restate earnings or which is infected with financial fraud. The "common sense" is that audit firms take their responsibility to protect the public interest with great pride and would not take risk for their own short term financial gain that may in any way damage their reputation.

2. The 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. "Common sense" is that a firm overly or exclusively dependent on auditing fees will face far greater pressure to retain client business than a diversified professional services firm.

3. The Independence Standards Board ("ISB") was established a very short time ago with the support of the SEC to address independence issues just such as this. The SEC's disregard for the role of the ISB is extremely damaging to the future of the ISB and to due process standard setting.

4. It is likely that the rule will decrease audit effectiveness by depriving audit firms of the knowledge that is gained by providing non-audit services, both knowledge of the client itself and knowledge about non-audit subjects that enable auditors today to look beyond the numbers to assess the impact of financial and non-financial factors on the quality of financial reporting. The "Panel on Audit Effectiveness" confirmed the positive interaction between audit and non-audit services when it reported that it found no instances in which independence was impaired by the provision of non-audit services, and, in fact, reported that in about twenty-five percent of the audits it reviewed, in which non-audit services had been provided, those services had a positive impact on the effectiveness of the audit.

5. The restrictions on non-audit services will negatively impact the ability of audit firms to recruit and retain the most qualified professionals, causing degradation in audit effectiveness. "Audit-only" firms will have difficulty attracting the necessary talent both from accounting programs and from other disciplines because the best talent will be drawn to industries with broader career opportunities.

6. The proposed rules will deprive the consumer (audit clients) of the freedom to choose the optimum service provider. Boards of Directors and Audit Committees should assess the impact of non-audit services on the auditor relationship with the registrant. This process of accountability has worked and should be enhanced.

Unfortunately, the widely publicized campaign of the SEC to support its position on the rule making, has itself done substantial damage to the reputation of the accounting profession. It has unjustly raised doubt about the actual independence of auditors, when, in fact, no empirical evidence has been put forth to support it. I urge you to withdraw the proposed rule, to honor your commitment to the ISB, and to allow the ISB to address these issues with appropriate due process.

Thank you for your consideration of these views.



James G. Castellano, CPA
Managing Partner

cc: Commissioner Paul R. Casey
Commissioner Isaac C. Hunt, Jr.
Commissioner Laura S. Unger