Walpert and Wolpoff, LLP

September 20, 2000

Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609

Subject: File No.: S7-13-00

Dear Mr. Katz:

Walpert & Wolpoff, LLP (W&W), is a public accounting firm licensed in the State of Maryland. W&W is a member of the AICPA SEC Practice Section with three offices serving the Baltimore-Washington region. Substantially, all of the work we have done since our inception in 1964 has been done serving closely held, family owned middle market businesses. To that end, prior to the sale of the tax and consulting operations to American Express Tax and Business Services Inc. in 1997, W&W provided attest, tax and consulting services to the middle market business in our region. Our consulting services have included business advisory, corporate finance, estate planning, technology, human resources and litigation services. These services have been provided to clients in a wide spectrum of industries.

We are concerned about various aspects of the proposed rule concerning Auditor Independence Requirements and would like to specifically comment with respect to its impact on the following:

1. Adoption of Similar Rules by Other Regulatory Bodies.

2. Effect on Middle Market CPA Firms and the Middle Market Clients they Serve.

3. Anti-competitive consequences.

4. Affiliates of the CPA firm.

Adoption of Similar Rules by Other Regulatory Bodies

Currently, W&W does not perform any work related to SEC registrants. However, we are concerned that while the rule is only applicable to audits of SEC registrants, there is a strong likelihood that other regulatory bodies would adopt similar rules. Regulatory bodies such as the Department of Labor, Office of Management & Budget and our Maryland State Board of Accountancy could affect the way we conduct business by adopting portions or all of the proposed rule. At a minimum, the AICPA would be pressured to adopt similar rules. The result would be that proposals designed to affect firms who conduct SEC audit work would be cascaded down to the non-public sector and cause middle market accounting firms to choose between being a provider of audit and tax services or consulting services, a decision we do not believe is appropriate based on the remainder of our comments.

Effect on Middle Market CPA Firms and the Middle Market Clients They Serve

Over the past two decades, there has been a significant change in the way middle market CPA firms and middle market businesses compete in their marketplace. Accounting firms have sought to bring value added services to their clients to assist them in competing with fewer resources than many of their larger competitors. Additionally, CPA firms have had to fight hard to attract and retain qualified professionals. The proposed rule will make it nearly impossible to attract and retain qualified audit professionals. One of the key reasons we have been successful in competing for staff with the "Big 5" and regional firms in our market is that we offer multiple career path options. These options cross-over each of our fundamental disciplines of attest, tax and consulting. Under our practice structure, our audit professionals routinely participate with American Express Tax & Business Services to provide many tax and consulting services. Our ability to offer these career broadening experiences are a significant reason we are able to attract and retain qualified professional staff.

The middle market clients we serve also enjoy the benefits of our being able to provide professionals with a multi-dimensional background. Such companies for years have looked to their CPA firm for consulting services of all types. They recognize that a CPA firm can leverage the comprehensive knowledge they have about their company and provide consulting services in an efficient and cost effective manner.

Anti-Competitive Consequences

The proposed rule would require a significant restructuring of our practice, the reality of which would be the elimination of services currently being provided (either audit or consulting). As discussed above, in firms our size, we cannot really separate audit professionals from those who participate in providing non-audit services. If firms our size were forced to choose between providing audit and non-audit services, we believe the result would be fewer middle market firms providing audit services. Accordingly, the rule will have created an anti-competitive playing field with the "Big 5" firms performing substantially all audit services. Additionally, our middle market clients will find it more difficult to obtain their audit and non-audit services at a reasonable cost because of the reduced competition.

Affiliates of the CPA Firms

The proposed rule, as we understand its provisions, would subject virtually all businesses affiliated with W&W to the independence rules. In our alternative practice structure with American Express Tax & Business Services Inc., this would require that many others, the American Express Company, its subsidiaries and investees would be prohibited from engaging in activities with W&W audit clients, regardless of the materiality level. Again, similar to our discussion above, a significant restructuring of our operations would be required to separate from such affiliations, which in turn would be detrimental to our ability to attract and retain qualified professionals and provide the services we currently offer to the middle market business community.

With respect to affiliate relationships, we would encourage the Commission to consider an approach already adopted by the AICPA's Professional Ethics Executive Committee in Independence Interpretation 101-14. We have followed such guidance for over a year now and believe it appropriately addresses the concepts of opportunity and motivation of persons outside W&W to influence the audit.


We appreciate the opportunity to comment on the proposed rule and we urge the Commission to consider our primary concerns of:

1. the rule is likely to be adopted by other regulatory bodies that will affect our firm's practice;

2. the negative affect the rule would have on our firm and our ability to attract and retain qualified professionals;

3. the negative affect the rule would have on the middle market companies ability to obtain quality consulting services at reasonable prices;

4. Anti-competitive consequences resulting from eliminating middle market firms from the service provider community, and

5. the unreasonable restrictions on activities between affiliates of W&W and its audit clients.


Walpert & Wolpoff, LLP