Date:    09/19/2000  7:41 AM

Subject: S7-13-00

I am writing to protest the proposed Revision of the Commission's Auditor 
Independence Requirements.  The draconian proposal by the SEC will restrict my 
Firm's ability to provide services which benefit clients, the investing public 
and the SEC.  
     
The SEC ignored the conclusion of the current Panel on Audit Effectiveness of 
the Public Oversight Board, a Panel that was formed at the request of the SEC. 
The panel concluded that, "both the profession and the quality of audits are 
fundamentally sound."  The Panel said it could find no evidence that the 
provision of non-audit services has hurt audit quality.  On the contrary, it 
concluded that in 25% of audits reviewed by the Panel, the non-audit services 
contributed to a more effective audit.
     
If adopted, there will be a negative effect on recruiting and retention of the 
best talent.  The best audit professionals will not want to be at a firm where 
25-40% of the market is "off-limits." and the same is true for the best 
non-audit professionals.  Similarly, the best and brightest students will not be
drawn to firms with a regulatory cap on the upward opportunities.  The 
"audit-only" firms endorsed by the proposal will have difficulty attracting the 
necessary talent both from accounting programs and from information technology 
programs, because the best talent will be drawn toward industries with broader 
career opportunities.
     
The proposed rule would impute to an accounting firm the activities of virtually
any entity with which the accounting firm has a commercially valuable business 
relationship by viewing such an entity as an "affiliate of the accounting firm."
     
The SEC's proposed rule is a solution in search of a problem.  Even the SEC 
admits that there is no empirical evidence that non-audit services have 
compromised audit quality or auditor independence, nor ever caused an audit 
failure.  None of the studies or reports cited by the SEC concluded that the 
scope of services impaired audit effectiveness, or that an exclusionary ban was 
necessary or appropriate.
     
In conclusion, the SEC's proposal to restrict the services offered by accounting
firms represents a fundamental restructuring of a profession that has 
successfully given investors the reliable, independent data they need for the 
past century.  The proposal presents a high risk of impairing the investors' 
access to reliable and independent data that is so desired by the profession and
the SEC.
     
This scope of services rule must not be allowed to go forward.
     
Regards,
     
Richard N. Pahre