Subject: File No. S7-13-00 re proposed rule amendments regarding audi
 
     
     
     
Mr. Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street
Washington D.C. 20549-0609
     
Dear Mr. Katz; 
     
        I urge the Commission to reconsider the sweeping  
nature of its proposed rule amendments regarding auditor 
independence because:
        A- there is a high probability of unintended 
consequences,
        B- the proposal could undermine the SEC's 
initiatives in championing the Independence Standards Board 
and strengthening Audit Committees, and         
        C- There are other approaches to improving the 
public's confidence in auditing and auditors. 
     
        Auditors have appropriately been an important 
source of advice to their clients on a variety of topics 
including implementation of new accounting and regulatory 
requirements, internal control systems and proposed 
transactions. These consultations could be incorrectly seen 
by some as constituting bookkeeping, excess involvement in 
financial systems or investment banking. Prohibition or 
excessive restriction of such services would adversely 
impact registrants, particularly smaller companies.  
     
        The Commission has been instrumental in the 
establishment of the Independence Standard Board and the 
rule making initiative undermines the role of that 
important body. I believe that the ISB should have the 
first opportunity to address the ramifications of scope 
of service on independence. If the SEC is not satisfied 
with the ISB proposals, the SEC can more properly act a 
that time. 
     
        The incumbent audit firm can be the most qualified 
vendor for services in certain instances, particularly when 
the client is under time or business stress. The 
Registrant should not be arbitrarily and universally denied 
access to their Audit Firm for these services. The recent 
SEC initiated changes in the role of Audit Committees 
provides the best mechanism to assess whether the proposed 
service compromises the auditor's independence in the 
circumstances. 
     
        There are admittedly issues with auditor 
independence and the effectiveness of auditing that need 
attention. The Independence Standards Board and more 
focused audit committees can help improve the process. 
However, I would additionally recommend changes in the 
governance systems of the major audit firms.
     
        The accountability of firms would be improved if 
the had independent Boards of Directors which oversaw their 
independence and the effectiveness of their audit systems 
and organizations. These Boards must be able to engage 
whatever resources were necessary to assist them in their 
duties and reports regarding their procedures and 
findings would be provided to the Firm's clients. 
     
        The activities of these new Boards of Directors 
would be facilitated if the Independence Standards Board 
had a capability to consult with them on issues. 
     
        I am presently a member of the Accounting faculty 
at Boston College and serve on the Audit Committee of three 
New York Stock Exchange listed companies. I had previously 
been a partner of Coopers & Lybrand, a member of the SEC 
Practice Section Executive Committee of the AICPA and member 
of the Financial Accounting Standards Advisory Council.The 
Public Oversight Board presented me with their McCloy Award 
for contributions to auditing.
     
        I can be reached at Boston College using the cited 
e-mail address and phone number.
     
        Thank you for the opportunity to comment on this 
important matter. 
     
Vincent M. O'Reilly
September 25,2000