September 22, 2000

Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609

Re: File No. S7-13-00

Proposed Rule Governing Auditor Independence

Dear Mr. Secretary:

Haefele, Flanagan & Co., p.c. is a certified public accounting and consulting firm located in Moorestown, New Jersey. Our firm provides accounting and auditing, tax and a wide variety of consulting services to a diversified clientele. The firm is a member of the AICPA - SEC Practice Section, the New Jersey Society of CPA's, the Pennsylvania Institute of CPA's and CPA Associates International, Inc., an international association of leading accounting and consulting firms with offices in principal U.S. and international cities. We are writing to you to express our grave concern with the proposal of the Securities and Exchange Commission on auditor independence that would have a catastrophic impact on our practices, our clients and prospective clients, and the public accounting profession.

We understand the SEC decided to move forward with these proposed rules prohibiting non-audit services without adequate facts and empirical evidence that non-audit services have compromised audit quality or auditor independence, or ever caused an audit failure. In fact, the Panel on Audit Effectiveness of the Public Oversight Board that was formed at the request of the SEC concluded that both the profession and the quality of audits are fundamentally sound and found 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.

In addition to performing audits of both public and non-public companies, our firm provides various non-audit services including accounting and bookkeeping services, payroll services, systems design and implementation, business valuations, financial planning, expert witness and various other management consulting services. As the businesses and systems of our clients continue to grow, we need expertise in these areas to help us perform the highest quality audits. If adopted by the SEC , the restrictive rule would affect every firm's ability to provide many non-audit services.

In addition to affecting firms, implementation of this rule could also adversely affect the relationship between auditors and clients. This proposal ignores the reality that the overwhelming majority of stockholders and corporate executives are confident in their auditor's independence and are satisfied with the overall quality of financial reporting. This was among the findings of a major national study of corporate executives conducted by the Independence Standards Board. Most importantly, none of the research conducted has found evidence to support the conclusion that providing non-audit services has impaired independence or audit quality.

Furthermore, 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 CPA's from representing audit clients before the IRS.

Most dangerous for our firms is the likely prospect that the proposed rule would set a precedent for other regulators. Many of our audits are non-SEC registrants. Thus, services provided to our non-SEC registrants could be severely impacted. The proposed SEC rule would be viewed as the new model by state boards of accountancy, as well as federal and other regulators. In addition, these new proposed rules could influence the regulatory approach to auditor independence outside the United States.

The proposed ban on non-audit services is an unnecessary and unjustified measure that will restrict the ability of many, many companies to exercise free choice in a market economy in selecting their auditors and outside consultants. It will also create a fundamental restructuring of a profession that has successfully given investors reliable, independent data for the past century. We recognize there are independence problems that the SEC is rightfully addressing, but urge the adoption of an alternative solution, such as more active Audit Committees or more disclosure, as a compromise course of action.

Very truly yours,

Thomas P. Fee, Jr., CPA
Robert T. Haefele, CPA
James A. Rogers, Jr. CPA
Arnold S. Page, CPA
Mary L. Gallagher, CPA
Maureen Campbell, CPA
Robert Gatelein, CPA
James Haefele, CPA
Fred Schutz, CPA
William J. Stackhouse, CPA

Haefele, Flanagan & Co., p.c.
P.O. Box 471
Moorestown, NJ 08057
Phone: 856-722-5300
Fax: 856-722-5395