Oregon
Board of Accountancy
3218 Pringle Road, S.E.
Salem, Oregon 97302
September 24, 2000
Chairman Arthur Levitt
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549-0609
Dear Chairman Levitt:
We, the Board members of the Oregon Board of Accountancy, are writing to express our concern regarding the revision of the Commission's Auditor's Independence Requirements. The Oregon Board of Accountancy is the statutory licensing body for accountants in the State of Oregon whose mission is to protect the public by regulating the practice and performance of all services provided by licensed accountants by enforcing state laws and rules. Our concerns are expressed in broad categories, rather than responding to all the requests for comments as mentioned in the proposed rule. We have reviewed the proposed rules and would like to comment on the proposed rules that we feel they will have serious implications for our licensees.
Our first concern is the short period of time that was allowed for comments. We as a Board typically meet only every other month and the short period does not allow adequate time to consider the proposed rule as a rule making body. The Board had representatives in attendance at the presentation that you addressed to the National Association of State Boards of Accountancy audience in Boston on September 18th., Although we were not originally preparing to respond to the proposed rules, we felt that it was imperative after we heard your presentation and the following presentation by Kathy Eddy, the American Institute of Certified Public Accountants (AICPA) incoming chairperson.
Our primary concern is that the Commission has chosen to bypass the Independence Standards Board (ISB) which was originally charged with the responsibility of developing a conceptual framework for independence applicable to audits of public entities. Our Board feels these changes will serve as the foundation for development of principles-based independence standards. Effective communication between the ISB, the SEC, the AICPA and other stakeholders will help shape stakeholders' opinions about ISB standards and the process by which those standards are promulgated and, ultimately, enhance stakeholders' confidence in financial reliability and the independence of auditors in general.
In your presentation, you stated that accountants who serve small private companies would not be held to the standards in force for auditors who audit the publicly traded companies. We question whether it is viable or feasible to have two sets of standards that apply to auditor independence. We feel this would be confusing and hard to justify to the public and our licensees. In our review of the proposed rules, we could not conclude that adequate consideration was given to the independence issues between these two drastically different engagements.
Most audit clients of our licensees are small privately-held companies referred to as "mom and pop" businesses that rely on their auditors to provide consulting services that would be subject to questions concerned with independence as detailed in your proposed rules. Imposition of these rules would restrict the company's freedom of choice when seeking outside professional services.
It also does not appear that sufficient time has been allowed for recent reforms to prove their workability and effectiveness, including the new disclosure and audit committee requirements adopted by the ISB, the New York Stock Exchange (NYSE), the National Association of Securities Dealers (NASD), the American Stock Exchange and the SEC.
In conclusion, the auditor responsibilities in regard to the above issues have changed over time and new rules are necessary to form the cornerstone for the profession in the new millennium. We urge the SEC to give adequate consideration to the voices of the stakeholders on these critical issues and take the necessary time to evaluate the effect that these sweeping changes will have on the public and other stakeholders. We appreciate the opportunity to express our concerns to you.
Sincerely yours,
James E. Houle, CPA, Chair
Oregon Board of Accountancy