CLAYTON & McKERVEY, P.C.
Certified Public Accountants & Business Advisors
VIA: E-mail firstname.lastname@example.org
On behalf of the CPA Firm, Clayton and McKervey, P.C., I would like to express concern over the SEC's current rule proposal regarding auditor independence.
The proposed ban on non-audit services is an unnecessary and unjustified measure that will impact the ability of many American companies to exercise free choice in selecting their auditors and outside consultants. This proposed rule could force sudden major adverse changes in the fundamental relationship between accountants and their clients.
We believe that the proposal would unnecessarily force many clients to dismiss CPA firms with which they are otherwise satisfied in order to meet the new regulatory. The proposal could affect the way firms provide almost any non-audit services, including accounting, financial information systems design and implementation, valuation, management, consulting and outsourced internal auditing, as well as actuarial, human resources, financial planning, investment, legal and expert-witness services. The proposal would also restrict accounting firms' entry into joint ventures, partnerships and multidisciplinary practices, and limit the circumstances under which CPAs can represent their clients before the IRS. It is our belief that non-attest services do not impair auditor independence. In fact, the provision of these services frequently enhances the auditors' ability to understand the business of the clients and the industry in which they operate. This then leads to improved audit effectiveness.
In addition, the proposal could affect the way in which firm membership associations serve their members. Firms join associations to improve their operations. This is frequently accomplished through networking, joint activities, and shared knowledge. We believe that this proposal may result in impairment of the firms' ability to participate in associations like this in the future. Consequently, this would have a detrimental effect on the viability of these firms and indeed, on the profession itself.
It is essential to consider carefully a proposal that would disrupt effective relationships between audit firms and their clients. This is especially true in view of the findings of a new survey by the Independence Standards Board, which revealed a majority of corporate executives are confident or their auditors' independence and are satisfied with the overall quality of financial reporting. The surveys also found most individual investors have faith in the quality and reliability of financial information available to them. There is no empirical evidence that non-audit services cause any impairment in audit effectiveness.
Furthermore, neither the SEC nor the Panel on Audit Effectiveness, appointed by the Public Oversight Board at the SEC's request, found evidence that providing non-audit services impaired audit quality. In fact, the panel discovered that, in some cases, non-audit services improved 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 basis. This scope of services rule must not be allowed to go forward.
CLAYTON & McKERVEY, P.C.
Donald H. Clayton