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: "Doug" at Internet
Date: 09/11/2000 7:55 AM
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TO: RULE-COMMENTS at 03SEC
Subject: RE: File No. S7-13-00
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Douglas Beal
Subject: File No. S7-13-00
Author: "Doug" at Internet
Date: 09/08/2000 3:34 PM
I support strong rules that divorce auditing from consulting. Mixing
interestes like that leads to subtle corruption. I know the auditors will
be up in arms against any such rules, because it represents large amounts of
cash to them. But I have vested interest supporting such rules, not only
because impartial auditing is important to my investements, but also because
subtle corruptions propagate feelings of apathy in the populace.
Thanks,
Doug
These opinions do not necessarly reflect those of Streambox, Inc.
Author: Bill Dunham at Internet
Date: 09/11/2000 1:54 PM
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TO: RULE-COMMENTS at 03SEC
Subject: re: S7-13-00
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While I am only a small individual investor and of little significance
in a sea of institutional investors, I have taken this moment to let my
voice be heard on a most recent issue. I am in agreement with your
proposal to separate auditing services from consulting services.
The significant growth in consulting services within accounting
firms leaves open the potential for errors of judgment in their auditing
services. I understand that actual hard evidence may not be apparent on
the surface. However, it becomes obvious that auditing judgment may be
clouded when large sums of potential revenues are dependent upon an
auditing decision from any firm that derives great revenues from
consulting services to the same organizations it is responsible for
auditing. The essence of good auditing is independent decision making.
It is most difficult to sustain independence when you are responsible to
a company for a good portion of your revenues in both consulting and
auditing services.
The separation of consulting and auditing is intuitive if a firm is
to maintain independence in its auditing procedures. I believe that
independence will contribute greatly to transparency. I believe this is
the ultimate goal, in order to provide the same rules for all within our
markets. Thank you for your vigilance on this issue.
B. Raymond Dunham
Author: at Internet
Date: 09/11/2000 11:19 AM
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TO: RULE-COMMENTS at 03SEC
Subject: Re: File No. S7-13-00
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In a message dated 9/11/00 10:38:18 AM Eastern Daylight Time,
Rule-Comments@sec.gov writes:
<< Auditing and consulting should always be independant of one another.
To me their coexistance by the same firm or related firms is a breach of
integrity, unprofessional and contrary to ethics. Carol Jean G. Ferrante>>
Author: "Jim Fifield" at Internet
Date: 09/11/2000 12:25 PM
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TO: RULE-COMMENTS at 03SEC
Subject: Fwd: Re: S7-13-00
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>Subject: S7-13-00
>Author: "Jim Fifield" at Internet
>Date: 09/08/2000 5:36 PM
>
>
>Auditors who share lucrative consulting contracts with the audited
>client have an obvious conflict of interest. This type of conflict
>has professional athletes banned from gambling in their sport. I suppose
>one can require that proof of a conflict has to be proven. I suggest you
>look no further than the record of professional money managers
>who have embezzled millions from their clients including some high profile
>cases. Some of those people were CPAs.Comments from James Fifield
>
Author: at Internet
Date: 09/11/2000 6:32 PM
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TO: RULE-COMMENTS at 03SEC
CC: fedleg@aicpa.org at Internet
Subject: Proposed Rule Governing Audit Independence
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To Whom It May Concern:
We, the members and staff of Franklin & Walsh CPAs, are concerned about the
outcomes of the pending Proposed Rule Governing Audit Independence. We feel
that:
1 The comment period is much too brief for the professsion to understand its
impact;
2. The Independence Standards Board is already set up to address this issue;
3. The SEC is acting without empirical evidence that non-audit services
actually compromise audit quality or auditor independence;
4. There could be a negative impact on the firm's audit practice and overall
financial health as a result of this pending rule.
Actually, it is in the best interests of the public to maintain a healthy and
competitive pool of smaller accounting firms so that the public has a choice
and so that it can obtain the services it needs at the most effective
costs....costs borne by the free market system....a market in which many
potential providers competitively vie for the work. When the market is
systematically weakened by an excessive abundance of regulations which have
weak purposes the public suffers and will be destined to pay a huge price to
oligopolistic and non-competitive survivors in the aftermath. This does not
need to happen if governance is tempered with reason and careful use of
governmental authority. The expectation that all non-audit accounting
services should cease between an auditing firm and the client is unrealistic
and unnecessary. The mere fact that there are firms associated with other
firms who conduct audits is not a valid cause to militate against those firms
in any particular vein to prevent such firms from providing accounting
services to clients audited by the associated firms. Firms of professional
practitioners affiliate themselves with other practitioners for a variety of
reasons usually having a beneficial professional effect. The sharing of
knowledge is useful to the consuming public. The cooperation of one CPA firm
with another does not automatically spell trouble for the users of audited
financial statements. Such affiliations are not usually the signal of wrong
doing or a lack of independence. The mass indictment of all accounting firms
for the transgressions of a few of them is tantamount to the incarceration of
all society members just because a few of them deserve to be incarcerated.
We trust that you will re-consider your proposed ruling and that you will
temper your rulings with reason and that you will not hamper the accounting
firms in their desire to provide necessary services to the consuming public
unless you have clear and sufficient grounds upon which to render your
verdicts. This is a serious issue to the health of small accounting firms. We
have worked with our blood and our sweat to achieve precious little gains in a
painstaking quest to become and remain professionals. We can not afford to
have our hands tied while attempting to serve our clients.
Sincerely,
John David Franklin
Author: "Robin M Hunziker" at Internet
Date: 09/11/2000 1:14 PM
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TO: RULE-COMMENTS at 03SEC
Subject: Re: File No. S7-13-00 -Reply
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Robin Hunziker
______________________________ Reply Separator _________________________________
Subject: File No. S7-13-00
Author: "Robin M Hunziker" at Internet
Date: 09/08/2000 5:47 PM
As a corporate attorney, I have always been very concerned about the degree of
non-accountability that third party auditors enjoy. This is especially
exacerbated by the inherent conflict created by the auditor also performing
consulting services. I believe that third party auditors should have a clear
fiduciary duty to all who might reasonably rely on the auditors' findings and
should be precluded from entering into any further relationships absent clear
proof that the fiduciary duty is not compromised in any manner.
Author: "Kruse; Brian D" at Internet
Date: 09/11/2000 8:03 AM
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TO: RULE-COMMENTS at 03SEC
Subject: RE: File No. S7-13-00
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brian kruse
>
> Subject: File No. S7-13-00
> Author: "Kruse; Brian D" at Internet
> Date: 09/08/2000 2:25 PM
>
>
> As a former accountant and a long term investor,
> I am very concerned about the conflict of interest that the Big Six Accounting
> Firms have with their consulting practices. When I was an auditor,
independence
> was difficult enough with an important client.
> In my opinion, I'm not comfortable relying on financial statements where the
> accounting firm has large contracts for consulting services. It is one of my
> larger concerns about investing in the stock market to begin with. Hopefully,
> you will approve this measure.
>
>
Author: "jefflane" at Internet
Date: 09/11/2000 10:40 AM
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TO: RULE-COMMENTS at 03SEC
Subject: S7-13-00 and Auditor independence
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I was pleased to read recently that the SEC is considering tightening the
rules concerning auditor independence. With markets moving at lightening speeds
nowadays, vigilence in the procurement and dissemination of reliable information
for the investing public is even more important than ever before.
Revenues from "consulting" services rendered by firms that also are
responsible for "auditing" have risen at an alarming rate over the last few
years. It's just hard to argue with the Biblical admonition that "where your
treasure is, there will your heart be also." Audits have now apparently become
almost a foot-in-the-door marketing opportunity for the more lucrative services
an accounting firm can provide. The problem is that at some point, this creates
a temptation to overlook some of the truly critical analysis that an auditor
should perform, because of the fear that an unfavorable word from the audit will
lead to the loss of not only the auditing business, but tons more business, as
well.
I suspect that you are hearing mostly from accounting firms concerning this
rule-making, and that they are arguing: (1) that the ability to cross-market
isn't really creating serious problems with the exercise of professional
judgment, because no auditor wants her reputation tarnished by a subsequent
disclosure that she let important things slip; and (2) that taking away an
auditor's ability to cross market other services would irreparably damage the
firm's ability to make a decent living.
There is probably some truth to each of these arguments. I doubt that a
reputable firm will deliberately allow wholesale fraud to slip through an audit,
because of the damage that would do to the auditor's reputation. However, if we
believe in trying to achieve efficient markets for publicly traded companies,
the real danger isn't as much in the large-scale frauds, as it is in the
accumulation of smaller "judgment calls" that an auditor with other commercial
interests may be tempted to let slide, even though someone with wholly
independent judgment would not. If the audited company gets the benefit of
every such call, and if the auditor overlooks some other little things that, by
themselves, are not individually important, the effect may be to make the whole
of the company's financial picture look rosier than it really ought to look.
That kind of poor information in the marketplace penalizes all investors in that
company, and also penalizes companies competing for those same investors whose
books are more accurate.
Second, it is undoubtedly true (at least on a short-term basis) that if the
SEC restricted an auditor's ability to sell other services, auditing as a
business would be less attractive compared to more lucrative consulting
services, and that this could hurt both the auditing firms, and the marketplace
for audits. However, I believe that this would be only a short-term problem.
Even with such a rule in place, publicly traded companies will still need to
hire auditors, and the companies that provide audits will still need to make a
living. The marketplace for audits may need some temporary readjustment, but by
and large, the market for audits will sort itself out, as markets always do,
especially when everyone has an opportunity to be fully and fairly informed
about the market.
I know it took some courage for the SEC to buck the investment guru lobby to
eliminate selective disclosures, but in a very short time, the entire market
will be much better for it. Individual investors like me will always be
especially grateful. In the long run, requiring true auditor independence will
have just as profound impact for all investors (individual and otherwise). I
hope the SEC will show a similar kind of courage with this decsision.
Thank you for your time,
Jeffrey B. Lane
jefflane@hqmail.com
Author: "James V. Leonesio" at Internet
Date: 09/11/2000 2:04 PM
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TO: RULE-COMMENTS at 03SEC
Subject: Re: File No. S7-13-00
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James V. Leonesio
>
>
> Subject: File No. S7-13-00
> Author: "James V. Leonesio" at Internet
> Date: 09/08/2000 6:34 PM
>
>
> Please carry on concerning Auditor Independence! Thank you and remain
diligent.
>
Author: "Dr Greg Lomas" at Internet
Date: 09/11/2000 9:05 AM
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TO: RULE-COMMENTS at 03SEC
Subject: audit independence
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As an investor who must rely on audited financial statements, this is the
bedrock on which we the public make decisions. There can be no question of
compromise. I agree that auditing and other services should be completely
separate.
Greg Lomas
Author: "Mike Mitchell" at Internet
Date: 09/11/2000 9:10 AM
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TO: RULE-COMMENTS at 03SEC
Subject: Auditor Independence
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Dear Sirs:
Why is there even a question about of Auditor Independence, when the
obviousness of the conflict of interest is so apparent? The relation between
the auditor and the company should be adversarial for the audit to be
meaningful.
Sincerely yours,
Mike Mitchell
2804 Brierdale Lane
Bowie, Maryland
20715
Author: "Greg Pence" at Internet
Date: 09/11/2000 9:16 AM
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TO: RULE-COMMENTS at 03SEC
Subject: Re: Separate Auditing from Consulting
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My name is Gregory Pence, and my address is:
71 Toussin Ave.
Kentfield. CA 94904
phone 415-836-1114
>
> I respectfully submit my opinion that auditing is a profession which must
uphold
> the appearance of impartiality. Any conflict whether real or imagined
cannot be
> distinguished by those on the outside especially given the intimate nature
of
> the auditors task. Each auditor must have a legal and ethical obligation
to
> their profession otherwise the profession will be useless. The profession
must
> be revitalized so that we may be able to put our trust in our auditors.
>
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Author: "Big" at Internet
Date: 09/11/2000 8:18 AM
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TO: RULE-COMMENTS at 03SEC
Subject: Re: "File No. S7-13-00"
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------------ wayne phillips
Subject: "File No. S7-13-00"
Author: "Big" at Internet
Date: 09/08/2000 2:40 PM
---------- individual investor, here, who thinks that auditors are not
independent . . .
AND SHOULD BE !
Big
Freedom isn't free . . . the price of freedom is eternal vigilance . . .
Author: "Kerry Quillan" at Internet
Date: 09/11/2000 9:36 AM
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TO: RULE-COMMENTS at 03SEC
TO: fedleg@aicpa.org at Internet
Subject: SEC's proposed rule to prohibit auditors from rendering non-
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Dear Chairman Arthur Levitt, Commissioners Paul Casey, Isaac
Hunt, and Laura Unger,
I am a CPA practicing in a small firm in Fairbanks, Alaska. I am
writing to express my grave concern regarding the SEC's proposed
rule to prohibit auditors from rendering non-audit services to their
audit
clients. We do not do SEC work, however, rules promulgated by
the SEC
usually set the standard for the industry, as other regulators adopt
them.
As a small firm practitioner, serving small businesses, this ruling
would be crippling both to our practice and to our small business
clients. Our clients are closely held, family businesses without the
resources to hire comptrollers. The accounting is normally
performed by a
full-charge bookkeeper. Our clients rely on us to be their business
advisors, tax planners, estate planners, and consultants in a
myriad of
other areas. They rely on us to advise them on difficult accounting
issues. They rely on us to draft their financial statements in the
course
of our review or audit engagement. They rely on us to provide
adjusting
and closing entries to their general ledger to correct their internal
bookkeeping. They trust us more than anyone. Our position as
their most
trusted business advisor allows us to know their business
intimately,
which allows us to provide improved audits. The better you know
your
client, the better you can audit, as you know what the risky areas
are and
where to concentrate audit effort.
This ruling, if adopted by SEC and then adopted by other
regulators, would effectively require a firm to be either an auditor or
a
non-auditor. It would require small businesses, which are often
already
strapped for cash, to hire two firms and deal with two sets of
accountants, at a greatly increased cost to them, both in money,
time, and
productivity.
There has been no compelling evidence to suggest that providing
non-attest services to an audit client impairs independence in an
audit. I believe this proposed ruling is out of touch with the needs of
small business. This ruling would also severely hamper
competition. If
this rule is implemented, I believe many more CPA firms would opt
to no
longer provide auditing services, and therefore the pool of available
auditors will shrink considerably. This would in turn drive up the
price
of obtaining an audit, and probably lower the quality of audits,
because
quality business advisor-CPAs will no longer provide them.
I respectfully request that you defeat this proposed rule.
Kerry Quillin, C.P.A.
Copies: Senator Ted Stevens, Senator Frank Murkowski,
Congressman Don Young.
Author: "Shelden H. Radin" at Internet
Date: 09/11/2000 5:39 PM
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TO: RULE-COMMENTS at 03SEC
Subject: Auditors
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As a stockholder in many companies, including Rite Aid, I am very
concerned about the accuracy and reliability of audits. It concerns me
when I hear that auditors often also sell consulting services to the
companies they audit. That situation clearly may lead to a conflict of
interest for the auditor.
I don't think I have any difficulty with auditors selling consulting
services to companies they DON'T audit, although I'd feel most
comfortable with the auditing and consulting businesses being completely
separated.
Shelden H. Radin
1939 Weyhill Drive
Center Valley, PA 18034
Author: "Jose Salazar" at Internet
Date: 09/11/2000 10:43 PM
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TO: RULE-COMMENTS at 03SEC
Subject: Accounting Reform
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Dear Sir or Madam:
I am a practicing CPA that strongly believes that reform is imminently
necessary. I do not believe that anyone learned anything from the insolvency
problems of the "Savings and Loan" fiasco, but I do believe there is still
time to avert a Dot.com nightmare. I believe that the Dot.com problem is
going to make the "Savings and Loan" fiasco look like a bookkeeping error.
If the CPAs did not get a black over the "Savings and Loan" problem than they
will definitely get one when the Dot.Com's disintegrate.
I have been a CPA for the last 20 years and I have seen the accounting
profession go from doing 80% acounting and auditing work to doing
approximately 80% consulting work. Unfortunately, the passport into the
lucrative field of consulting can only be obtained wearing an Auditing badge.
That is why Accounting firms want to keep both consulting and auditing,
regardless of the independence issues. Once you've tasted some of that
consulting money it is not easy going back to the days of old. That is why I
think that the only real solution is for the SEC to assume the role or
provide a mechanism for that role.
Accounting Firms use the CPA credential as bestowing some type of
"authority". That because of this "Authority" having an accounting firm
provide you consulting is the least hazardous road. Otherwise things may
not come out the way you want them too.
All this things will come out when our next shake up occurs. Of course I
myself and all consumers prefer not to have the shake up, because I don't
think the SEC will have the fortitude to stand up to the Accounting
Profession.
Sincerely,
Jose Salazar
_________________________________________________________________________
Author: Robert Schaap at Internet
Date: 09/11/2000 9:53 AM
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TO: RULE-COMMENTS at 03SEC
Subject: File No. S7-13-00
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ARE AUDITORS INDEPENDENT?
The SEC would like to see accounting and consulting services kept separate to
prevent
conflicts of interest.
The stakes are high, and when consulting fees come to be many times more
important than audit fees, it should be patently obvious to anybody that
independence is likely to be impaired. When self-interests predominate,
trouble
is not far behind. And it comes into special focus as a profession becomes a
business.
Any time that an auditing firm was actually facing the possibility of having
"smoking gun evidence" disclosed, it would quietly settle the case and seal
the record as a condition of the settlement -- preventing the SEC
investigators from ever
being able to publicly disclose what they know to be true.
And this is precisely what the SEC is faced with -- attempting to convince
the
public of the severity of a problem it gets to see up close, but isn't
allowed to actually
reveal the details of.
As a member of the public, I would like to see the SEC's desires in this case
come to fruition.
Sincerely,
Robert J. Schaap
Author: at Internet
Date: 09/11/2000 7:21 PM
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TO: RULE-COMMENTS at 03SEC
CC: frank02@foxinternet.net at Internet
Subject: Auditing vs Consulting
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I hold numerous stocks within my IRAs. I am very concerned that Auditing
companies can also provide consulting services to the companies they audit. I
understand that, in many cases, the consulting services provide income well
beyond that provided by audits.
I have come to rely on the 10Qs and 10Ks to evaluate companies. This audit vs
consulting possible conflict of interest really concerns me. Please correct
this alarming situation as soon as reasonable.
Stanford D. Schneider
12114 160 Ave. KPN
Gig Harbor, WA. 98329
253 884 6484.
Author: at Internet
Date: 09/11/2000 3:24 PM
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TO: RULE-COMMENTS at 03SEC
Subject: Separation of duties
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I agree with the SEC position that major accounting firms who perform audits
of publicly traded companies should be prohibited from providing business
consulting services. I believe that the firms independence can certainly be
question. This, in my opinion, is enough reason to prohibit the combination
of audit and other business services.
Ross B. Taylor
President & CEO
972-401-2100
Author: at Internet
Date: 09/11/2000 11:32 AM
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TO: RULE-COMMENTS at 03SEC
Subject: Auditing Vs Consulting
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Please continue looking into the practice of an individual or company
auditing an organization and being employed as a consultant. This practice
raises a conflict of interest that is obvious to the commonsense part of the
brain, yet odd to think otherwise.
I am an individual investor who relies on the accuracy of the numbers a
company reports to make a decision as to put my hard earned money into.
This conflict of interest can, will and does occur. To let it continue would
be a violation of right Vs wrong.
Thanking You
Chris M. Villareal
Author: "Christopher Woo" at Internet
Date: 09/11/2000 11:38 PM
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Subject: File No. S7-13-00
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To Whom it May Concern,
The issue of auditor independence is a critical one, and though no concrete
evidence of compromised audits has not been found, this issue must be
addressed. The potential for conflict of interest occuring with accounting
firms seeking to cross-sell their consulting practices is tremendous, and in
the end, it is the public who is harmed, as evidenced by the scandals at
MicroStrategy and Waste Management. Please consider the welfare of the
public interest in your analysis of this issue and act to separate
accounting firms from their consulting arms. Thank you.
Sincerely,
Chris Woo
http://www.sec.gov/rules/proposed/s71300/0911b01.htm
