Donald G. Mantyla, CPA
September 25, 2000
Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609
Re: SEC's proposed rule governing auditor independence (file No. S7-13-00)
Dear Mr. Katz,
This letter is my response to the proposed independence requirements for accounting firms that audit SEC registrants. As President of our CPA firm, I believe this proposal will severely impact and hinder the continuing growth of our firm, along with the related negative impact to many of our clients. Let me explain why I believe the proposal is very unwise.
Our firm audits several SEC registrants, and provides additional services to these clients. In many cases, we have found that these additional services we provide do not impair our auditor independence, but conversely, allow us to have a better understanding of the client and its industry. This greater understanding allows us to be more aware of issues which should be addressed as we perform the audit.
In addition to SEC clients, we also provide audit and related services to many non-SEC clients. If this proposal is passed, we are afraid that the SEC rules would be viewed as a new model by state legislators and state boards of accountancy, as well as federal bank regulators, and even possibly the Department of Labor in establishing independence rules that apply in their respective areas. Currently, we provide many bookkeeping and related services concerning the audit client's accounting records or financial statements. We are often asked by the client to assist with management functions, to assist in recruiting, hiring or designing compensation packages for officers, and we often render expert services in legal, administrative or regulatory proceedings. Much of our revenue could be dramatically curtailed by our ability to provide services other than audit and tax services to these clients.
Even though the proposal would not affect tax related services to audit clients, it appears to prevent the firm from acting as an advocate for an audit client. As you might expect, the accounting firm is by far the best advocate in any audit proceedings. This proposal appears to potentially prohibit the firm from representing audit clients before the IRS and other regulatory agencies.
Over the years, we have established very valuable business relationships with many of our audit clients. This proposed rule appears to prevent the firm from engaging in any activities, which make good economic sense for the client, because of the view that the entity is an affiliate of the accounting firm.
Based on the above reasons, and the fact that there is no empirical evidence that non-audit services have compromised audit quality or auditor independence, I must request that the proposed rule not be allowed to pass. Please contact me if you have additional questions, comments or concerns.
Donald G. Mantyla, CPA