TO: Rule-Comments
FROM: Alison Spivey
DATE: January 15, 2003
RE: Release Nos. 33-8154; 34-46934; 35-27610; IC-25838; IA-2088, FR-64
File No. S7-49-02

On January 9, 2003, Jackson Day, Acting Chief Accountant and other members of the Office of the Chief Accountant and the Division of Corporation Finance staff met with the chief financial officers of three German registrants about, among other topics, the proposed requirements regarding auditor independence. The individuals and the companies represented included:

    • Dr. Clemens Borsig - Deutsche Bank

    • Dr. iur. Manfred Gentz - DaimlerChrysler

    • Heinz-Joachim Nueburger - Siemens

The CFO's thoughts on the proposals are as follows:

  • Audit form rotation results in a drop in audit quality in first couple of years of new auditors, but this has not been proven (Deutsche Bank);

  • Siemens attempted in the past to rotate the top 100 audit partners on their audit (subsidiaries included).

    • Found lack of expertise and resources, especially with smaller offices of audit firm.

    • Alternate plan now is to review with Audit Committee the amount of time since partners were rotated.

      • They propose requiring Audit Committee review of rotation of partners.

    • Also believe there is a drop in audit quality in the first 2-3 years following audit firm rotation.

  • The group expressed concerns about the implications of pre-approval requirements for audit and non-audit services and also thought that the proposals regarding tax services had a "chilling effect."