September 21, 2000


September 22, 2000

Mr. Arthur Levitt, Chairman
C/o Mr. Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Avenue, N.W.
Washington, D.C. 20549-0609

Reference File No.: S7-13-00

I am the Chairman of the Virginia Board of Accountancy and am writing to you as an individual member of that Board since the Board will not hold a meeting prior to the September 25, 2000 deadline for comments on the SEC's proposed independence rules.

I heard your presentation to the NASBA Annual meeting in Boston on June 18 and was part of the standing ovation because I embrace your public interest goals and believe that your views on behalf of the public are well intentioned. However, I believe your attempts to pit the small firms against the large firms impede dialogue and infer unwarranted, negative implications with respect to the larger firms.

Rather than commenting in detail on specific proposals with which I agree or disagree, I want to address three broader issues: different independence rules for firms based on the size of the firm, whether the client is public or non-public or other firm or entity characteristics; the time frame in which independence rules should be developed; and the appropriate body to deliberate independence issues.

I have practiced public accounting for 41 years, eight of which were with a small firm and 33 of which were with a national firm. After retiring from the national firm this past January, I am presently serving a few small audit and review clients so I am again a small (very small) firm. During these 41 years, I have served clients of all sizes, public and non-public, regulated and non-regulated, and served as a reviewer of SEC filings. I have always strived to represent the users of the financial statements and to maintain my independence, and during this entire time, I have never seen a need to approach independence differently due to the size of the firm in which I was practicing or any characteristic of the firm or entity. This is because independence issues arise from situations, events, transactions, etc., and not as a result of the size, public or non-public, or other characteristics of the firm or entity. Thus, I believe your reaching out for support from small firms on the basis that the independence rules will or should be different or less stringent for small firms, or firms serving non-public companies, or based on any other characteristic of the firm or entity, is based on an erroneous premise.

Any SEC implemented rules will definitely trickle down to the small firms. It is important to note that the accounting profession is regulated on a state-by-state basis and, thus, SEC rules cannot prevent this occurrence.

I am very concerned that the SEC is moving entirely too fast, without the input of various constituencies; 75 days is simply too short a period of time. The issues, particularly those relating to scope of services, are very complex and require considerable time to develop input and solutions. The SEC must insure that it has enough data to support moving ahead with rulemaking.

I believe the Independence Standards Board (ISB) was doing a very creditable job of studying the various independence issues and devising solutions. Maybe its board composition needs to be revised; maybe it needs more manpower; I don't know. However, I do believe that the independence rules should be developed by a group such as the ISB in a thoughtful, deliberative manner with input from all of the affected parties and not be "handed down" in a "brass knuckled" manner by a regulatory body.

Lastly, I wanted to encourage the SEC to look very closely at the `compromise' position very recently proposed by a number in the profession as a means to address some of the non-audit services which may raise greater public perception issues than other services


Ellis M. Dunkum, CPA