September 20, 2000
Mr. Jonathan Katz
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609
RE: File No. S7-13-00
Dear Mr. Katz:
The Association for Financial Professionals (AFP) respectfully requests the Securities and Exchange Commission (SEC) to extend the comment period by 180 days on the Commission's proposed rules regarding auditor independence published in the Federal Register on July 12, 2000. If this extension is granted, AFP plans to survey our membership on the proposal and invites SEC participation in that effort.
AFP represents over 14,000 financial professionals who, on behalf of over 5,000 corporations and other organizations, are significant participants in the nation's financial markets. Many of our members are responsible for engaging their organizations' outside auditors and consultants to examine and advise on various management and financial issues. Organizations represented by our members are drawn generally from the Fortune 1,000 as well as the largest of the middle market companies. They have an active, sizable stake in regulatory and legislative changes impacting financial management; this includes auditing as well as consulting services.
Preliminary discussions with our members have surfaced an active interest in the proposed rule, as well as a wide range of opinions, including the inability to comment on the proposed rule because of the relatively short 75-day period allowed to present their views on this extremely sensitive issue. The SEC release has posed some 400 questions, many of which raise fundamental issues about the proposed regulatory approach. Our members have expressed confusion about the intent of the release, given the question process which reflects an open mind to alternative rulemaking, while constraining comment within the limited time period of 75 days.
The Association recognizes the need for the audit process to be independent, and equally critical, to be widely seen as independent. If this is not the case today, then this need may be addressed by a variety of proposals which would resolve apparent conflicts between audit and non-audit services. The accounting industry maintains there is no conclusive evidence of these conflicts, and we are not cognizant of a substantial record of empirical studies establishing the link between audit failure and non-audit services.
In order to evaluate the diverse opinions of our membership, as well as to achieve a consensus view of the SEC proposal, we plan to survey our members. Provided that a sufficient extension of the comment period is allowed-180 days-AFP will initiate a membership survey which we believe would provide informed and detailed comment by the corporate users of auditing and consulting services. We invite the SEC to participate in the formulation of the survey instrument, and to review our data. The survey results should provide insights to the extent to which our members engage accounting firms to perform both audit and non-audit services, their perception of problems from this combination, their views on how to address problems cited in the SEC release, and an estimate of the quantitative and qualitative costs to be incurred through implementation of the proposal.
We believe this suggestion is helpful, and have submitted our comment with this intent. Accordingly, we urge the Commission to extend the comment period by 180 days.
|Patrick M. Montgomery
Vice President, Finance
AFP Government Relations Committee
| James R. Haddad
Cadence Design Systems, Inc.
AFP Financial Accounting and Investor
Relations Task Force