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: 09/10/2000 12:19 AM
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TO: RULE-COMMENTS at 03SEC
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TO: Security Exchange Commission
Staff - File No. S7-13-00
FROM Ken Amerson
5957 Woodridge Rock
San Antonio, TX 78249
RE: Proposed Ruling - Separation
Independent Audit Services and Auditors Consulting Services
DATE: September 9, 2000
TO WHOM IT CONCERNS:
I kindly thank you for the opportunity to enter a comment into the
proceedings for the proposed S.E.C. rule separating independent audit
services from consulting services.
I am not a C.P.A. nor am I involved with the provision of consulting
services. I admire and respect each of these essential services. On
occasion over the years I have sought out and have had the good fortune to
benefit from the services of independent auditors as well as from their
consulting services.
For slightly over three years I have followed the development of the
discusion's many facets.
My view, offered at this time, is to encourage the S.E.C. rule making
efforts to totally separate activities which provide independent auditors'
opinions from activities which provide consultations. All future parties are
best served with the clarity and wisdom of this approach.
Understandably, some short term service employment and service investor
dislocations may occur within auditing firms.
In the long run, small and large investors, local as well as global, will
continue to share a level playing field with their recognition and piece of
mind provided by the value and integrity of an independent certified audit
opinion.
Thank you.
Author: "Roland" at Internet
Date: 09/10/2000 10:32 AM
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No audit firm should be providing an opinion of the financial statements of a
company that is also paying any amount whatsoever for consulting services of the
same or related firm!
Roland W. Cyr, Auditor
10530 Providence Way
Fairfax, VA 22030
Author: at Internet
Date: 09/10/2000 1:14 PM
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As an outsider and individual investor, playing by the rules and trying to
improve myself and family, in the pursuit of happiness and the American
dream, I have to rely on truthful financial statements to make investment
decisions. If financial statements misrepresent the economic performance of
a firm, false guidance will undermine our investments. It is imperative that
auditors remain independent of the firm they audit and beyond the slightest
reproach. The degree of risk may otherwise drive us all away from the stock
market. Our investments should not be undermined by the fraudulent activity
that may arise from an auditor/client relationship at the expense of the
general market investor. This asymmetry of information and misrepresentation
undermines the integrity of the whole market. Should that independence
erode, it will certainly compromise the entire stock market and our
capitalist system.
Joe Dernfeld
Author: "John Dossing" at Internet
Date: 09/10/2000 5:05 PM
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SEC Chairman Arthur Levitt ,
I beleive Like John Bogle, legendary founder of The Vanguard Group and index
fund investing, that there is something inherently wrong in the current system,
which allows Auditors to audit, while consulting with the same company. Common
sense tells me, and other indiviual investers, this conflict of interests will
lead to at the very least the appearance of conflict of interest. How can we
trust any audits with the appearance of a conflict of interest. Why invest if we
can't trust the figures presented to us in the financial statements?
Best Regards,
John Dossing
827 Ashmount Ln
Arlington, Tx 76017
817-467-6205
email: jdossing@dialfree.net
Author: "The Doyles" at Internet
Date: 09/10/2000 10:49 AM
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Dear sirs:
It appears to me that collusion is the only predictable product of Companies
that own and sell both consulting and accounting services. Collusion being
creative accounting that masks bad news from the owners, stockholders. I would
believe that in fairness and good business practices both of these services
should not be offered to the same company by one company. If they are, surely
the end product should be suspect and probably will not produce the
unadulterated facts. We all know that he who has the Gold makes the rules, and
in the case of combined consulting and auditing firms, it follows that the
auditing firms must confirm that the council of its consulting firms is
working. In other words prove that the plan is working.
Aden J Doyle
Author: "DEmerson" at Internet
Date: 09/10/2000 8:35 AM
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Dear Sirs
I can not see how there would not be a conflict.
Deborah Emerson
Author: Bruce Francois at Internet
Date: 09/10/2000 3:09 AM
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As a concerned investor, and a realist with limited confidence in the
ethics of auditors who simultaneously sell consulting services, I
encourage the SEC to move towards ensuring that auditing services can
not be offered by the same client offering consulting services.
Thank you,
Bruce Francois
Author: "Frank B. Geng" at Internet
Date: 09/10/2000 8:45 PM
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TO: RULE-COMMENTS at 03SEC
CC: "'pricorphq@aol.com'" at Internet
Subject: To Support SEC Draft on Proposed Independence Rule S7-13-00
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Dear Chairman Authur Levitt
Commissioner Paul Casey, Isaac Hunt, Laura Unger,
My name is Frank Geng, a licensed CPA in Illinois. After I read the SEC
draft on proposed independence rule, I cheer for this route SEC should have
taken long time ago. As an CPA, I am well aware of the independence both
in appearance and indeed is the virtue of the practice. There are a lot of
firms are currently providing both consulting and assurance services to
list companies. In fact their assurance are partially, if not entirely,
based upon the consulting recommendations the same company made in the
past. Moreover, some firms even provide long-term internal control
services and the same time external assurance service. I strongly oppose
such conducts not only because they have different objectives in nature,
but with the fear of weakening the assurance aspect of the traditional work
a CPA usually provides.
I would like to see a passage of this draft and make it not only a rule but
also a living motto for all professionals.
Sincerely,
Frank Geng
CPA
Author: at Internet
Date: 09/10/2000 12:36 AM
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Dear SEC:
I am an individual investor. I would like to register my
support for your proposed rule that accounting and
consulting services be kept separate to prevent
conflicts of interest.
Thank you,
Arthur Gross
(arthur.c.gross@att.net)
Author: "L/R Hesmondhalgh" at Internet
Date: 09/10/2000 3:42 PM
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The notion that those who audit companies will have no other ties to those whose
fiscal health they are reporting on would seem to be common sense.
Apparently this is exactly what the companies with the most to hide and the
accounting/consulting firms with an eye solely to their profit margins are
counting on in regard to public and political disinformation.
As far as insisting on some measure of evidence before accepting any regulatory
controls; previous scandals in the industry have shown that the participants are
very, very adept at covering their tracks. Or in the case of the unlucky few,
very adept at demanding settlement conditions which prevent the full extent of
the problem from being used to monitor the entire system.
As an individual investor, I would like the SEC to be aware that I appreciate
their attempts to reinforce the Concept of the Bleeding Obvious: it's a
difficult situation when an auditor is paid by the entity it is supposed to
report on.
It is an impossible situation when the auditor is also paid for information on
circumventing the audit....
Thank you for your time.
Lisa Hesmondhalgh
PSC 1005, Box 48
FPO AE 09593-0002
Author: at Internet
Date: 09/10/2000 9:24 AM
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Subject: Independence of audit and consulting
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I have a strong belief that, while it sounds good that a CPA firm can be
professional when it comes to doing the right thing with respect to its
duties, when you have as many dollars involved in fees that this will almost
always affect most peoples judgment. Unfortunately, the nature of man has
shown time and again through the ages that money can corrupt a person's
better or even best judgment. A firm faced with the situation of discovering
a problem with the accounting practices of one of its clients has a tough
enough assignment to do the right thing when you are talking about hundreds
of thousands of dollars. If you throw more fees at risk from a consulting
standpoint it makes the decision that much more difficult to do the right
thing. With the public trust and money at risk with the proper functioning
of the role of CPA firms in this country, I think it imperative there be a
separation of consulting fees from audit fees. Thank you, Arthur E. Hish,
CPA
Author: "njacklaw" at Internet
Date: 09/10/2000 8:09 AM
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Gentlepeople: The issue of whether auditors should be prohibited from consulting
the businesses they audit is a no brainer in my humble opinion. In my
profession (attorney) we have very strict rules when even the appearance of a
conflict of interest arises. We must disclose the conflict and get our clients
permission to continue representation. With so many people now researching
companies on their own to make investment decisions for their own and their
family's future it is imperative that an audit be critical and objective. The
chance that an auditors results might be tainted by financial self interest
should be prohibited by rule. Thank You, Neil Jackson (Troutdale, Oregon
Author: at Internet
Date: 09/10/2000 1:22 PM
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Subject: File No. S7-13-00 "Independent Audits"
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The very idea of an audit being "independent" under today's rules must
stretch the
limits of credibility in any sane investors mind. How on earth could an
audit be
objective, accurate, deep reach for real facts, etc. when the audited is
paying the
bill? Also, one must consider the auditing firm not only wants to maintain
its
auditing contract but in so many cases is trying to sell additional services
to the
company being audited? Evidence of wrong doing?? Surely you are not serious
to honestly inquire as to what happened to evidence. (What about
Firestone-Ford?
It doesn't take a genius to deduct that no high ranking officer is going to
spill his
guts to the government and eliminate his job and pension.)
Alas, I am not aware of anyone as yet figuring out how to enforce HONESTY.
My only conclusion is that as an investor I must scatter my eggs in lots of
baskets
and hope that in the long run I will survive. James L. Knowles, Jr. 6936
Folger Drive,
Charlotte, NC 28270
Author: "Kenneth Lavoie" at Internet
Date: 09/10/2000 9:10 AM
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Sir / Madam
I would like to add the voice of an individual investor to the testimony of Mr.
John Bogle on the topic of required changes to ensure the independence of
auditors. Having read a fair amount on the MicroStrategy debacle, it is clear
to me that the current modus operendi of auditors all but eliminates any value
their efforts may have for investors, but clearly enhances the business
opportunities of the auditors parent companies. I applaud the efforts of the
SEC in bringing this issue to light, and look forward to changes that will pass
the common sense review, which current practices fail.
Yours truly
Kenneth E Lavoie
Author: at Internet
Date: 09/10/2000 11:22 AM
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The firm that audits a company should not be allowed to give other services
such as consulting to the company. Audits should be kept independ of other
services.
Richard Lindell
St. Paul Minnesota
Author: MNOBLES at Internet
Date: 09/10/2000 10:23 AM
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I am writing to state my opinion regarding Auditor Independence. I work
for an accounting firm as a secretray. I strongly feel that auditor
independence is crucial to an accurate audit. While I am not an
accountant, I have enough bookkeeping background to see the potential for
misconduct. I believe the only ways to insure that there are no
misstatements or "tweaking" of figures is to either audit the audit or to
make sure the CPA firm performing the audit has no other financial
relationship with the client besides performing the audit.
Sincerely,
Moira Nobles
Sincerely,
Moira Nobles
Author: at Internet
Date: 09/10/2000 12:05 AM
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Yes, please get the Accounting profession to separate between auditing and
consulting services.
Also, I would add more staff to crosscheck the numbers that are being pumped
out by the public companies, there is too much phony stuff going on out there
and the CPAs are saying "DO IT UNTIL WE GET CAUGHT, THE ODDS ARE THAT YOU
WILL NOT BE AUDITED BY THE SEC".
That is what is going on out there, They started it in the Construction
Industry, then the Insurance, then Health Care and now doing it on all
companies.
Don't let them bully you.
J Peller
Author: at Internet
Date: 09/10/2000 7:18 PM
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To Whom it Concerns:
Auditors should not be allowed any other relationship with the companies
they audit. Certainly any type of consulting is a conflict of interest.
Tim Scarbrough
Raybay9954@aol.com
Author: "Ray Schatz" at Internet
Date: 09/10/2000 1:28 PM
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I for one, as a small independent investor am glad to see the SEC concerned
about Auditor Independence. I too am concerned that Auditors are now selling
services to the same clients they are auditing. It's hard to see how it is
possible for them to retain much independence over the long term in such a
situation.
We small investors must depend on you for protection in this area
Sincerely,
R V Schatz
rschatz@wizzards.net
Author: Frank Tilaro at Internet
Date: 09/10/2000 5:17 PM
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-- I agree with Mr. Bogle on the subject of independent auditing of
companies by accounting firms that provide consultation to the same
company they are auditing. An 18% difference between consultative fees
and accounting fees spells trouble for the individual investor who
expects an unbiased audit. The SEC needs to examine this issue.
Dr. Frank Tilaro
Author: Waterman at Internet
Date: 09/10/2000 5:43 PM
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TO: RULE-COMMENTS at 03SEC
Subject: Seperation of Auditing and Consulting Services
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Seems to me to be a fairly clear conflict of interest for any company to
make fees from both auditing and consulting for the same corporate
client. And if the consulting fees are a larger component of income than
- or growing faster than - the auditing fees, the conflict is simply
increased.
Little like the stock market recommendations of brokers working for
brokerage houses with vested interests in the stock they are
recommending... and which they don't, for reasons unknown, have to
publicly declare when making the recommendations. But that one is
another issue for another day.
For now, can we please either make it illegal for any one accounting
firm to fulfill both audit and consulting roles for the same
corporation, or worst case scenario force them to disclose their
consulting fees for that client in their auditors report
Sue Waterman
sewaterman@hotmail.com
Author: Fred Westervelt at Internet
Date: 09/10/2000 9:26 AM
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Subject: independent auditors
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Sirs:
I have just now been updated by Mr. T. Gardner and staff on the
issue at hand- the possible (?likely) abuse of auditing and consulting
activities in the financial (stock) world. I would add to this my
serious concern that analysts, who are so powerful in manipulating
market evaluations even in the face of contrary information, may be
similarly conflicted.
My credentials in this matter are negligible, but my sense of what
is right is quite strong. It is imperative that there be absolute
confidence (so far as possible) in the practices and control
mechanisms of those institutions that guide and regulate our awesome
economy, and that they be unsuspected. Caesar did no less for his
wife.
Please, be able to assure us that there be no improper collusions,
that this is at least one area that is uncorrupted, and that we can
thus sleep comfortable that our lifeblood will not be let wrongly.
Thank you.
F.B. Westervelt
Milton Farm
Charlottesville, Virginia 22902
Author: at Internet
Date: 09/10/2000 2:33 PM
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I am 100% with the SEC to demand "Auditor Independence". There is certainly
a conflict of interest with auditors also consulting with the same accounts
that they audit the books. Let's be fair to the investors of all publicly
held business.
Most sincerely,
Alicia Witt
17 Weebetook Ln.
Cincinnati, Ohio 45208
http://www.sec.gov/rules/proposed/s71300/0910b01.htm
