From: Jan R. Boyce [jrboyce@nacdonline.org]
Sent: Monday, February 24, 2003 5:04 PM
To: rule-comments@sec.gov
Subject: File No. S7-02-03 Standards Relating to Listed Company Audit
Committees

TO									February 24, 2003

Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, NW
 Washington, DC 20549

RE:	File No. S7-02-03
	Proposed Rule:  Standards Relating to Listed Company Audit Committees

Dear Mr. Katz:

The NACD joins the Institute of Internal Auditors in supporting the efforts
of the Securities and Exchange Commission (SEC) to improve corporate
governance processes of listed companies by specifying standards for audit
committees. In particular, we endorse the main recommendations made in the
letter Mr. William G. Bishop III sent you on February 18, 2003.

These recommendations are as follows:

1) All listed companies should have an internal audit function.

2) The head of internal auditing in all listed companies should report to
the appropriate independent committee of the board of directors (e.g., the
audit committee).

3) This appropriate independent committee should approve the hiring and (as
necessary) firing of the internal auditor, as well as the scope and funding
of the internal audit function.

We will leave it to the SEC to decide how much detail on implementation to
include in the final listing rule. For authoritative guidance, the SEC would
be wise to refer to Mr. Bishop’s letter. We would also refer you to the
Report of the NACD Blue Ribbon Commission on the Audit Committee (to be
delivered tomorrow.)

The NACD welcomes the opportunity to provide this commentary on the proposed
rule with respect to the internal audit function. As other issues come to
our attention, we may provide additional comments.

Sincerely,