September 25, 2000
Mr. Arthur Levitt
C/O Jonathon G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609
RE: SEC Proposed Rule S7-13-00 Revision of the Commission's Auditor
Independence Requirements (sent via e-mail)
Dear Chairman Levitt,
I have been asked by my firm to convey our strong opposition to the proposed SEC rule to change the auditor independence requirements. I represent Reznick Fedder & Silverman (RF&S) which is the largest CPA firm in the State of Maryland. Headquartered in Bethesda, Maryland and with four other offices nationally, RFS employs over 550 men and women.
We oppose the rule for several reasons:
Therefore, we request that the SEC stop the implementation of the proposed rule and convene appropriate oversight boards to complete the task of modernizing the auditor independence standards.
RF&S recognizes it is imperative for our profession to deal with independence matters in a fresh manner in light of sweeping changes to the profession which result from the "New Economy." However, with all due respect to Chairman Levitt and the SEC, an approach which will result in unilateral enactment of a rule which will overhaul the entire CPA profession is unwarranted and requires much more time to study. We were encouraged by the work of the O'Malley panel of the POB and the Independence Standards Board (ISB). The ISB would be our choice as the appropriate body to set independence standards for auditors of public companies.
We do believe the profession should heed the recommendations of the POB and ISB which call for more disclosure in financial statements, more oversight by Audit Committees, and more research into services that might have a potential conflict for auditors. Further, we believe effective "firewalls" can be set forth between audit services and non-audit services. The de-regulated financial service industries are a recent example of how services can be separated in the public interest. Without consideration of these alternatives and the involvement of current oversight boards, we cannot understand how the SEC can move forward on the proposed rule.
We appreciate the opportunity to submit these comments.
Reznick Fedder & Silverman
4520 East West Highway, Suite 300
Bethesda, MD 20814-3319
Telephone: (301) 652-9100
Marc W. Podnos, CPA