Investor protection is, and always has been, a fundamental objective of KPMG -- an objective that is attained through the professional integrity of KPMG's auditors. I am honored to be a custodian of that tradition of integrity. All of us at KPMG are well aware that this bedrock principle has provided the foundation for our firm's continued ability to thrive.
I am convinced that the Commission's proposed restrictions on non-audit services, if adopted, would irreparably damage auditors' ability to protect investors. KPMG's formal comment will go into these issues in much detail.
Unfortunately, given the short time that the Commission has allowed for public comment, KPMG will be unable to provide satisfactory answers to many of the Commission's most important questions. The Commission recognized in its proposal that it had little information about the current effects of non-audit services on audit quality or perception of independence, or about the potential impact that its proposal would have. As a result, the Commission asked commenters to supply such information, but that task cannot be performed in the short time currently allotted. I add my voice to the chorus of those asking the Commission to extend the comment period by 180 days. The Commission should recognize that its proposal is so sweeping that the Commission's own decision-making process would benefit greatly from the improved quality and increased quantity of information that will be available if the comment period is significantly extended.
For today, however, I want to focus on two effects that I already know the proposal will have. The proposed restrictions will greatly decrease the accounting profession's ability to attract the best and the brightest students, and they will also diminish our ability to meet client needs and give effective audits in the future.
It is no secret that accounting firms are confronting unprecedented challenges in recruitment and retention. At a time when accounting enrollments are already down, accounting firms are also facing stiff competition from the explosive growth of the New Economy, which has created a vast pool of high-tech start-ups that are wooing both young and experienced financial professionals. At such a time, auditing cannot shrink back from the cutting-edge of business and technology and still attract the interest of the brightest minds. But, in the world envisioned by the Commission's proposal, auditors would be relegated to limited roles during a time of exciting change.
In the last few decades, our economy has undergone a seismic shift. Computers, the Internet, the information age -- these changes have fundamentally altered the way most companies do business and even the way most investors participate in the capital markets. KPMG and the accounting profession have worked hard to keep up with these changes, but even now the pace of change is accelerating. More than ever, the dynamic growth of our economy demands a depth and breadth of skill and experience -- both at the firm level and at the level of the individual audit. It was no surprise at all that the O'Malley Panel's intensive review found that non-audit services actually increase the quality of many audits.
The Commission must realize that its proposed restrictions will force firms to specialize in either audit or non-audit services. The quality of individual audits will suffer under the Commission's restrictions.
Furthermore, the Commission will, by fiat, impose its model on the accounting industry at a time when the market is presented with different firm structures. The market, not an unjustified and premature regulation, should determine which structure can best meet clients' needs, consistent with auditors' ethical obligations. We believe it is imperative that the Commission leave the profession the ability to evolve in the future in response to the choices made by our clients and their investors.
Our audit clients demand not only that we provide the best services but also that we be cost-effective. Their choices have required us to seek the best personnel, with a broad range of skills, and to take advantage of the synergies between people who can work together on different tasks for the same clients. Non-audit service restrictions would hurt our clients by increasing audit costs while threatening audit quality and limiting client choice.
The Commission's proposed restrictions on non-audit services would dramatically weaken our abilities to discharge our public trust and to perform effective audits for our clients. I urge you not to adopt those restrictions. In addition, I reiterate my conviction that the Commission will be able to reach a much more informed decision if it extends the comment period by 180 days.