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U.S. Securities and Exchange Commission

Comments on Proposed Rule:
Revision of the Commission's Auditor Independence Requirements

[Release Nos. 33-7870; 34-42994; 35-27193; IC-24549; IA-1884; File No. S7-13-00]

Author: at Internet Date: 09/08/2000 6:21 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents If auditors are so good at their jobs how does a Cendant, Mckesson HBOC, Waste Management, Microstrategy, IKON Office Solutions, and I can name many, many more, happen? Auditor independence is critical to the on-going success of our capital markets. If the investing public losses confidence in the ability of auditors to audit private and publicly traded firms the valuation on those firms most go down as risk loads increase. You can not convince me that when their is big money involved from the consulting side of the house that the auditors are not consciously or sub-consciously affected by it. In fact, I have always been convinced that the size of the audit fees may be enough to slant how the audit is approached. My personal opinion is that publicly traded firms should be required to change auditors every three years. Mckesson HBOC might have discovered their problems at HBO & Co. earlier. My understanding is that one of the junior auditors for Mckesson (Mckesson had acquired HBO & Co. and their firm was a different firm then HBO & Co.'s) was sending standard letters to HBO & Co.'s clients as respects sales and the results were not what one would expect. Billions of dollars of market capitalization was destroyed needlessly. The alleged fraud would have been discovered sooner or possibly not even have happened if the individuals involved understood that the auditors due diligence was going to be higher. What if the auditor discovers that the systems/practices/etc. that the consultants put in place are flawed or defective? Will they be as quick to identify them as they might if there were no conflict of interest? Isn't the fact that we have to question a conflict of interest enough in and of itself? The argument that the auditor needs to do the consulting work to understand better the issues, etc. for a particular client suggests to me that the accounting firms don't consider their auditing staffs to be bright enough on their own to understand all the issues as they would affect the audit. Sorry, I know enough accountants to know that they are intelligent and curious people who will learn what they need to know to do the audit. And, of course, they could hire consultants to educate themselves. It always seems to come back to money. We have substantial rules for lobbyists, how is it different? Thank you for inviting my opinion on this very serious matter. David F. Allen

Author: travis ashby at Internet Date: 09/08/2000 4:23 PM Normal TO: RULE-COMMENTS at 03SEC Subject: S7-13-00 ------------------------------- Message Contents TO: SEC I support the concept of "auditor independence". Too much money is at stake. And in our history, nothing has proven to more often compromise corporate integrity than the bottom line. Regardless of whether or not it can be proven that a firm or firm's "consulting" services have impacted the integrity of their accounting, there is little reason not to separate the two functions entirely. The only argument in favor of keeping the current system in tact is, essentially, the "trust us, we're professionals who abide by a code of ethics" argument. That's not good enough. There are too many people who have suffered or would suffer on the even rare occasion that ethics might be comprosmised. Sincerely, Travis Ashby 5100 S. Angeline St. Seattle, WA 98118

Author: at Internet Date: 09/08/2000 6:46 PM Normal TO: RULE-COMMENTS at 03SEC CC: djanich@freebornpeters.com at Internet Subject: S7-13-00 ------------------------------- Message Contents The auditor's argument of an absence empirical evidence actually underscores the problem of not having independent audits. Empirical evidence doesn't get regularly reported due to the conditions contained in the various settlement agreements that involve an auditing firm which has negative evidence to disclose. The cases do settle 95% of the time. The case record is sealed as a condition. So naturally the SEC investigators would not get the opportunity to publicly disclose what they know to be true. For this and other reasons, the SEC must have Auditor Independence to rely on as the markets continue to grow at amazing rates of speed. Thank You for your attention to this important rules matter. John Ashenden, Attorney at Law, 180 N. LaSalle Street, Suite 2500 Chicago, Illinois 60601

Author: at Internet Date: 09/08/2000 7:18 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents Yes, seperate audits and consulting. This is a must and needs addressing immediately. Marth J Bredestege

Author: "Jack Burson" at Internet Date: 09/08/2000 11:39 PM Normal TO: RULE-COMMENTS at 03SEC Subject: S7-13-00 ------------------------------- Message Contents In my opinion the independence of any auditor who also renders compensated consulting services to the company he is supposed to be auditing is ipso facto fatally compromised. The auditors responsibility should be to critically examine the accounting records and primary daily financial records of the company to determine if there any discrepancies between the two. Then the auditor should insure that the public financial statements of the company accurately reflect its true condition. An auditor cannot perform this responsibility if it is simultaneously a vendor of consulting services to the company being audited. Sincerely, I.Jackson Burson, Jr. jackburson@hotmail.com

Author: "CHRISTENSEN;EMORY (HP-Boise;ex1)" at Internet Date: 09/08/2000 4:26 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents I understand the SEC is currently struggling with the issue of audit independence. As a very experienced private investor, I share the concern of the SEC. Firms who do "independent" audits, should not be allowed to provide consulting services at the same time. There's just way to much opportunity for "subtle" influences. I support SEC chairman Arthur Levitt's proposal to require separation of the two. Regards, Emory Christensen Boise, Idaho

Author: at Internet Date: 09/08/2000 7:12 PM Normal TO: RULE-COMMENTS at 03SEC Subject: Auditors Independence ------------------------------- Message Contents I believe, as a common investor, that there is certainly a conflict of interest where auditing and consulting are concerned. If an auditing firm would like to extend its relationship with a client into consulting, it should find an auditing replacement. I'm sure cooperation in the accounting industry is not common, but it's time to start. If PWC sees a longer-term, more lucrative relationship with a client in consulting, it should divert the auditing to one of its competitors who do not have a relationship with that client. I feel that, much like analysts and underwriters in securities, where money is involved it is easy to commit fraud. To bag a big consulting deal, it is possible that an auditing firm may intentionally overlook or cover-up accounting misdealings. And even the possibility of misdealing should be enough to stop the possibility of conflicts from ever rearing their ugly head. I say that each accounting/consulting firm can only do auditing or consulting for a client, not both ... the fallout from accounting firms who must drop one or the other should keep revenues somewhat constant within the industry and should actually make them more efficient as they may and should concentrate on what they do best ... it will just make the firms a little more aware. Sincerely, Allen Dahm

Author: "George E Dath Jr" at Internet Date: 09/08/2000 6:40 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents I think it is extremely critical that Auditors are independent of the company they are auditing. That is, if the auditing company is doing business with the company being audited, it should not be allowed to conduct the audit. At the minimum, they should be required to completely disclose any non-audit related business. If that is permitted, perhaps the SEC should set rules designed to make the relationship very visible to stockholders and even set permissible guidelines. The best option though is to tell them they must get a different firm to do the audit. G. Dath Jr. 528 Lost Lake Rd. Arlington, VT 05250

Author: "Dermer; Jeffrey" at Internet Date: 09/08/2000 2:49 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents To Whom It May Concern: I am writing to voice my opinion on the proposed limitations on auditor's ability to provide consulting services. I believe that is very important to tread warily on this issue. At first blush, it may look like a good idea. However, we must ask ourselves, what will the end result be? Will most accounting firms be split into separate entities, one for auditing and one for everything else? Probably. This will add costs to all users of financial statements by reducing economies of scale. It may reduce costs to users of financial statements that have had the specific statements that they have relied on compromised. It is really hard to say which would be greater. I think that of greater importance is what will the result be on the quality of audited financial statements. More than likely, due to the limited growth in the audit field, we will see a massive consolidation into one or two major firms. The cost of audits will go up due to increased pricing power, while the incentive to provide quality work will diminish as the market will likely be split into just 2 or 3 firms. Further, will the self-dealing really disappear? Auditors will continue to have a conflict of interest with the firms they audit. They will still want to retain the business and they will be forced to balance future income against professional ethics. This is not meant to be a thorough analysis. One thing is certain, we ought to be loathe to interfere with the free market, unless external costs are being created. I am not convinced that this is the case. Probably a better solution would be to increase the protections for whistle blowing within the large accounting/consulting firms and increase the level of sanctions in order to increasingly deter undesirable behavior on the part of accounting professionals. Perhaps the SEC/AICPA could provide databases with complaints against particular accountants and/or firms, in order to increase the quantity and quality of information available to the public. I believe, as a student of law and economics, that the public interest is better served by less government intervention and increased transparency as well as stronger fiduciary duties on the part of upper-management. Ultimately, it is management that is responsible for fraud and auditors can only be accomplices to it. While a quick fix might seem appealing, I do not truly believe that the SEC will end up with the desired result while accruing significant costs to the accounting profession as well as all publicly traded companies in the form of higher fees. In the spirit of full disclosure I will tell you that I do not work for an accounting firm but I am a trained accountant with a background in law and economics. Regards, Jeff Dermer

Author: Jason Dufair at Internet Date: 09/08/2000 4:48 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents I applaud your efforts for independence in auditing and urge you to proceed with your efforts in this area. Your efforts regarding selective disclosure were very welcome - keep up the great work. -- Jason Dufair - jase@purdue.edu 765-496-1185 My grandfather once told me that there were two kinds of people: those who do the work and those who take the credit. He told me to try to be in the first group; there was much less competition. -- Indira Gandhi

Author: "Mike Dyer" at Internet Date: 09/08/2000 2:42 PM Normal TO: RULE-COMMENTS at 03SEC Subject: Auditor Independence "File No. S7-13-00" ------------------------------- Message Contents I am in complete support of the SEC's position in demanding Auditor Indepence from other services rendered to Client companies. Regardless of the evidence, or lack thereof, it only makes good sense to ensure that an Auditor has no conflicts of interest by having other dealings by which they would financially benefit from the company which they are tasked with auditing. Michael R. Dyer

Author: "Barb Gibbens" at Internet Date: 09/08/2000 3:58 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents As an individual investor, I strongly support an SEC rule that would prohibit accounting firms from auditing the books of corporations for which the accounting firms also consult. -- Barb Gibbens 4167 Poudre Canyon Highway Bellvue, CO 80512 (970) 224-9389

Author: "Brent Goodwin" at Internet Date: 09/09/2000 9:34 AM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents As a private investor and also business owner, I can easily see reason for concern and would strongly urge that conflicts of interest be eliminated (as much as possible) from the auditing of companies financials. After all, accountants are also in business and must take the route that is the most profitable to their firm and if auditing is a "necessary evil" but not as lucrative, yet helps build their consulting business, well the choices become too easily weighted to dropping the auditing ball. Dr. Brent Goodwin

Author: The Hatfields at Internet Date: 09/08/2000 5:35 PM Normal TO: RULE-COMMENTS at 03SEC Subject: "File No. S7-13-00" ------------------------------- Message Contents Dear SEC Representative, I agree with the concern of the SEC regarding the status of independent auditors who also consult with the clients they are auditing. I believe that even the most moral of individuals are placed in an awkward situation when asked to perform the task of ensuring accurate financial records with a client that also supplies the auditing firm with considerable sums for other business services. I agree with the comments made by John Bogle and others that although evidence of deceit is not clearly available, common sense dictates that the pressure to commit wrong certainly exists. It will happen, if it has not already happened. As an independent and novice investor, I applaud the work of the SEC to level the playing field for those of us who do not have first-hand access to business leaders and transactions. We cannot possibly compete without your work on our behalf. Peggy Hatfield Madison, WI 53705

Best regardsAuthor: "Daniel Hegglin" at Internet Date: 09/08/2000 2:59 PM Normal TO: RULE-COMMENTS at 03SEC Subject: Auditor independence ------------------------------- Message Contents Hi, On the topic 'The SEC would like to see accounting and consulting services kept separate to prevent conflicts of interest.' I vote in favor of this proposed rule. dan Daniel Hegglin Riverstone Networks 5200 Great America Parkway Santa Clara, CA 95054 (408) 878-6526 - work (925) 736-4474 - home office

Author: "Kristian Holvoet" at Internet Date: 09/08/2000 6:12 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents Dear SEC, It is improper for auditing firms to provide other services to the audited company. It violates the STATED independent nature of the auditor. I fully support new regulations that limit the relationships between the auditor and businesses in question. I have no doubt that there have been violations of trust that have hurt individual and institutional investors. Please move to protect the investor's (true owner's) rights. Sincerely, Kristian Holvoet

Author: "Robert Jennings" at Internet Date: 09/08/2000 6:27 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File NO. 57-13-00 ------------------------------- Message Contents SEC As a beginning individual investor, I strongly endorse your proposal to regulate auditors who also perform consulting services. I am a government auditor and, by policy, am not allowed to make recommendations on measures to comply with deficiencies I have identified because it is clearly a conflict of interest. Clearly, auditors should be independent of profit motives. At the least, strong firewalls should be established in such firms with duality of purpose, such as that in brokerage/banking/merger company arena. Robert Jennings Harrisburg, PA

Author: "George R. Jenson" at Internet Date: 09/08/2000 2:39 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents Whether or not empirical evidence can be found of improper audits being done by the same company that is doing consulting, the two should be separated, purely because there is a clear conflict-of-interest that could threaten the sanctity of the audit. Investors have a right to expect that sanctity as it is promised without having to wonder about the same firm monkeying with the audit to preserve or enhance their consulting business. --------------------------------------------------------------------------- George R. Jenson 520-622-0125 ext 15 / 800-228-7326 Partner, Fraternity Management Group Mob 520-241-5407 / Fx 520-882-5159 744 North Stone Avenue No eternal reward will forgive us now Tucson, AZ 85705-8351 for wasting the dawn. - Jim Morrison ---------------------------------------------------------------------------

Author: "Jeff Kimmel" at Internet Date: 09/08/2000 6:26 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents Keep the auditing and consultant sides separate. Jeff Kimmel jakimmel@bellsouth.net 954.965.8231 954.307-7161 Pager 954.967.9020 Fax PO Box 627 Dania, FL 33004-0627 http://www.SEBrowardHomes.com

Author: "Art Koolwine" at Internet Date: 09/08/2000 5:37 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents As a small private investor, I would like to offer my opinion on the subject of Auditor Independence. I fully support the separation of Audit and Consulting, as I believe that there is a real danger by allowing the two under one roof. In many cases, the consulting arm will devise methods & procedures and underlying operational computer systems to support a company's operations. These are often subject to close scrutiny during audits. Although shortcoming in this area may not materially affect the reporting of the financial status of the company, if the auditors were independent, they would be much more likely to be critical of processes/procedure/systems that, in their opinion, were not optimal. Where the auditor & consultant are essentially one and the same, I don't believe this is likely to happen. In the long term, this could have an impact on a companies ability to survive in today's rapidly changing and highly competitive business environment. Regards, Art Koolwine 1401 Westmont Drive McKinney, TX 75070 972-548-1474

Author: Don Kuhlman at Internet Date: 09/08/2000 3:40 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File No S7-13-00 ------------------------------- Message Contents Hello, I've been reading some information about the above mentioned item and thought I would send my opinion to you as an individual investor and citizen. I believe that auditor's should NOT have any other motives in performing their audits of public companies. The auditor should not be working to discover any issues in a business while at the same time charging a consulting fee to help this same business. By having a vested financial impact in the success or failure of a public company you would automatically place your objectiveness, or the appearance of it, in jeopardy from the standpoint of being able to perform an honest evaulation of that same company. I am by no means an expert in this subject, but common sense should prevail in my opinion. Thank you. Sincerely, Donald R. Kuhlman

Author: "Daphne Yang Lin" at Internet Date: 09/08/2000 4:00 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents As an individual investor, I whole-heartedly support any efforts the SEC would make to mandate that auditing & non-auditing (e.g., consulting) services for publicly traded corporations be handled by independent firms. Although there may be barriers to full disclosure as to the severity and extent of compromises that can arise from these intermingled relationships, common sense dictates that separation of service providers is an absolute must. I think abuses do exist and have gone unchecked far too long. I applaud the SEC for taking steps to protect public interest in this matter. Daphne Yang Lin Los Angeles CA

Author: at Internet Date: 09/08/2000 7:06 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents Please pass this rule about independent auditors. Daniel Metsch Aventura, FL 33180

Author: Jose Plasencia at Internet Date: 09/08/2000 3:04 PM Normal TO: RULE-COMMENTS at 03SEC Subject: S7-13-00 ------------------------------- Message Contents Just to let you know that I am for the approval of the rule. Jose Plasencia

Author: "Camille P. Potts" at Internet Date: 09/08/2000 5:52 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents I am an individual investor who wants integrity in the stock market to be maintained by independent auditors. Camille Potts

Author: "William Prescott" at Internet Date: 09/08/2000 4:04 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File#57-13-00 ------------------------------- Message Contents SEC... As an individual investor I applaud your stand on the potential conflict of interest that "independent" auditors have between auditing a company and simultaneously serving as a consultant. The temptation to "shade" the numbers is too great. Whenever I cast my votes on the annual proxy statement I invariably vote against retaining the same auditor. William Prescott

Author: Dale Quigg at Internet Date: 09/08/2000 5:51 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents Please continue with your efforts to reduce possible temptations audit firms may encounter when they are also actively engaged in consulting work for a company. Thanks, Dale Dale Quigg Aspen Technology, Inc. 425.492.2385

Author: at Internet Date: 09/08/2000 6:46 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents I am in favor of enacting regulations to separate auditing functions from consulting functions. Sincerely, Richard W. Reeks

Author: "Richter; David" at Internet Date: 09/08/2000 2:56 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents I support the SEC in your objective to legislate auditor independence. It seems nearly impossible that auditors would not be influenced by lucrative consulting contracts for the same organization. I appreciate the SEC's role in making the US markets the most trusted domestically and internationally. Auditor independence would significantly enhance that trust. Sincerely, Dave Richter fidricht@dof.ca.gov (916) 445-0211 x.2857

Author: at Internet Date: 09/08/2000 6:44 PM Normal TO: RULE-COMMENTS at 03SEC Subject: Put "File No. S7-13-00" ------------------------------- Message Contents hello, i am asking for independent audtits by the sec. thank you, kimberly sayer

Author: "David J. Smith" at Internet Date: 09/08/2000 6:03 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents In my humble opinion the practice of awarding contracts other than the contract for audit to auditors should be halted; either the auditors audit the company OR they provide contract services NOT BOTH - too much oportunity for preferential treatment, too much temptation to tilt issues in favor of the company under audit, too many opportunies for graft. (In a similar vein brokers/banks should be prohibited from trading in securities when they have received income from practices other than the sale of securities (eg. financing, IPOs and the like). David J. Smith Keep up the good work SEC (I'm a big fan of your pontifications on selective disclosure).

Author: "Soule; Donald C. (ISFPC)" at Internet Date: 09/08/2000 4:42 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents I am surprised to learn that there is not already a rule requiring "auditor independence" and am writing to register my strong opinion that the lack of such a rule seriously compromises my ability to evaluate an enterprise and invest accordingly. Thanks for listening. Donald Soule Dcsoul@ispat.com

Author: Maria Spassoff at Internet Date: 09/08/2000 2:42 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File # S7-13-00 ------------------------------- Message Contents I absolutely agree that auditing and consulting services from the same company should be kept separate, or closely monitored. I am a private citizen with no vested interest in any auditing or consulting firm. Thank you, Maria Spassoff

Author: Anjul Srivastava at Internet Date: 09/08/2000 3:06 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents Yes, I wholeheartedly support the proposal to separate auditing activities from consulting and other activities. To put it more precisely, a company's auditors should not have any other relationship with the company, especially, they should not be acting as consultants for the company. With compliments for being pro-active on this proposal, Regards, Anjul Srivastava.

Author: WP at Internet Date: 09/08/2000 2:42 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents I feel strongly that the autonomy of the audit process is compromised significantly when business interests, outside the audit, are provided by the auditing company. I strongly support SEC rules forbidding a companies audit firm from providing any other kind of service to that company..particular consulting services. Independent audits need to remain independent. This is not an accusation of impropriety or wrongful abuse of power, it is a condemnation of a practice that makes that easily available to companies in the pursuit of profits. This does not prevent accounting companies from providing consultation services, only prevents consulting for the same companies that they are auditors for. The same number of audits and consultation opportunities (legitimate ones) will exist. It is just a shuffling of who consults for who and eliminates the conflict of interest and some of the shady ones. Dave Starratt

Author: "Sun; Qing" at Internet Date: 09/08/2000 5:39 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents I support SEC in the matter of auditor independence. I believe unbiased independent auditors are critical to market order, and separating consulting from auditors to prevent conflict of interest will be in the public interest. Qing Sun FIRST UNION SECURITIES Tel: 704-715-1380 Email: qing.sun@funb.com

Author: Robert Tuttle at Internet Date: 09/08/2000 2:45 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents SEC: I agree with the position you have taken regarding Auditor Independence, as an individual investor I find it refreshing to know that there is a form of checks and balances for auditors. thanks, --rob ------------------------------------------------------------------------ Rob Tuttle Motorola, Imaging & Entertainment Solutions Phone : 480-814-5018 Pager: 1-888-699-8821 ------------------------------------------------------------------------

Author: at Internet Date: 09/08/2000 5:38 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents Simply put, "Auditor Independence" is an idea who's time has come. Let's level the playing field by making the "officials" as impartial as possible. Bob Valente

Author: at Internet Date: 09/08/2000 6:36 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File #57-13-00 ------------------------------- Message Contents It is important to separate auditing functions from consulting functions. Maybe the accounting firms could construct a firewall between the two within their own firm. But, so far, it appears that they have not done that. If that's true, then the SEC must address the issue and take action. Robert H. Weir