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: "Mike Block; Tax Fighting CPA" at Internet
Date: 09/13/2000 11:26 PM
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TO: RULE-COMMENTS at 03SEC
Subject: Proposed SEC Rule, 65 Fed. Reg. 43, 148 (2000).
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This CPA of 35 years thinks there are simple rock solid
reasons why this Auditor Independence Requirements rule SHOULD be adopted.
Rule 2-01(b) provides, in part, that "The Commission will
not recognize an accountant as independent, with
respect to an audit client, if the accountant is not, or
would not be perceived by reasonable investors to be,
capable of exercising objective and impartial judgment
on ALL issues encompassed within the accountant's
engagement."
The proposed rule has been overdue since the AICPA adopted ethics
interpretation 101-3. That rule ruled says
CPAs are not independent, for purposes of issuing
audit AND COMPILATION REPORTS if they make
entries in client records without consulting the client. The key thing new
about this interpretation is it effectively
brought the AICPA into compliance with an old SEC
prohibition on writeup work by supposedly independent
CPAs.
It is patently obvious that CPAs cannot independently
audit their own work. Ever since they were unable to
report on it for compilation purposes, the standard has
been clear. Auditors must test and rely on bookkeeping writeup work,
Information systems, internal control systems, valuations, taxability of
mergers, capitalization,
depreciation, et al.
If the SEC & the AICPA are right about CPAs not being
able to audit or report on their writeup work, or other
entries in client records, then they obviously cannot issue
certified or compilation reports by relying on any of the
other types of specified work.
michael block
Author: "Callahan; Mary F. (Resouces Connection)" at Internet
Date: 09/13/2000 1:22 PM
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Receipt Requested
TO: RULE-COMMENTS at 03SEC
Subject: RE: file No. s7-13-00
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> Subject: file No. s7-13-00
> Author: "Callahan; Mary F. (Resouces Connection)" at
> Internet
> Date: 09/12/2000 4:31 PM
>
>
> I absolutely agree an audit firm's opinions and scope of work is
> compromised by the lure of large fee consulting engagements with the same
> client. I am part of the investor group that was damaged by the Micro
> Strategy debacle because I relied on the fact that a world class auditing
> firm's opinion should mean that financials are fairly stated in accordance
> with generally accepted accounting principles. Obviously, that was not a
> reasonable assumption due to independence issues arising from this cross
> reliance of audit and consulting fees between the Microstrategy and it's
> audit firm. Mary Callahan
>
>
Author: "Keith DeJonge" at Internet
Date: 09/13/2000 1:47 PM
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TO: RULE-COMMENTS at 03SEC
Subject: Ref. No. S7-13-00
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To All:
I am employed in a CPA firm in Grand Rapids, and as a member of the public
accounting profession, I am concerned about the changes proposed by the SEC as
regards auditor independence. While the rules governing independence do require
change, the changes as proposed by the SEC carry the issue far beyond anything
that is warranted. Their proposal would significantly limit the services that
particularly those of us serving non-public clients are able to offer, and
therefore would not allow us to meet the needs that these clients have, as we
have been able in the past.
I urge you and your colleagues to as much as is within your ability to oppose
this measure, and to preserve the relationship of industry to public accounting.
Keith A. De Jonge
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Author: Bob Dekema at Internet
Date: 09/13/2000 9:33 AM
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TO: RULE-COMMENTS at 03SEC
Subject: S7-13-00
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Dear Sir or Ms:
I do not think auditors should be able to offer consulting services to
their customers because of conflicts of interest. Our system of accounting
accountability must be preserved.
Thank-you
Bob Dekema
P.O. Box 143
Fairfield, IA
52556
515-472-3744
Author: James Dilley at Internet
Date: 09/13/2000 8:48 PM
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TO: RULE-COMMENTS at 03SEC
Subject: Re: File No. S7-13-00
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Reply to: Re: File No. S7-13-00
My name is James Dilley, an individual investor and I want to urge you to
continue to fight for the separation of auditing and consulting services. An
independent audit is essential to the public who relies on this information to
be unbiased and fair--and even the potential appearance of wrongdoing is one
that should not be foisted upon any company. Thank you.
>
>I am an individual investor and I want to urge you to continue to fight for the
>separation of auditing and consulting services. An independent audit is
>essential to the public who relies on this information to be unbiased and
>fair--and even the potential appearance of wrongdoing is one that should not be
>foisted upon any company. Thank you.
Author: at Internet
Date: 09/13/2000 1:41 PM
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TO: RULE-COMMENTS at 03SEC
CC: fedleg@aicpa.org at Internet
Subject: File #S7-13-00
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Gentlemen,
I wish to comment on the proposed rules from the Securities and Exchange
Commission regarding prohibiting non-audit services and audit services to be
provided by the same firm.
I wish to state that there is no evidence which points to the fact that
non-audit services have compromised audit quality or auditor independence.
Therefore, it seems like the commission is tryng to fix a problem which
DOESN'T EXIST.
There is also a larger "trickle-down effect" issue which would impact me
and my firm if this rule is passed. As you know, state boards of accountancy
generally adopt similar rules in order to "harmonize" with the SEC and this
would be very detrimental to our practice. We audit many construction
company clients as well as provide non-audit services throughout the year. If
we were not able to provide those non-audit services, it would greatly reduce
our income and have a negative effect on our firm. The non-audit services
throughout the year also enable us to provide more informed audit services
and to assist clients in making changes we recommend as a result of the
audit.
For the above reasons, I respectfully request that these rules NOT
be put into effect and that the situation be allowed to remain as it is.
Thank you for your consideration and I hope that the concerns of Certified
Public Accountants across the country will be heard and you will vote
accordingly.
Sincerely,
Edward
J. Dought, CPA
Author: "Laurence W. France" at Internet
Date: 09/13/2000 7:46 PM
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TO: RULE-COMMENTS at 03SEC
Subject: Auditor Independence
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Dear Sir:
I must agree with John Bogle that the potential for conflict of interest
is too great to allow auditors to also function as consultants. I
support any ruling that will minimize this "temptation".
L. France
615 Wilson Dr.
Lancaster, PA. 17603
Subject: File No. S7-13-00
Author: at Internet
Date: 09/09/2000 8:14 PM
My name is Rex Hansen and I'm writing to address the question that is being
addressed by the above case on whether or not consulting work and auditing
work can compromise the results shown to stockholders. There should be no
doubt that the two functions should
be totally separate. No matter how hard a firm might try...when millions of
dollars of consulting fees are on the line it just might influence the
audit.
I read about this case in a website I read daily called "The Motley Fool".
I
believe Mr. Tom Gardner will be addressing this subject soon in a hearing.
Please add my comment to that of the many stockholders that would urge you
along with the SEC to clearly separate the two functions. Thank you.
--------------------
Author: "Joe King" at Internet
Date: 09/13/2000 1:14 PM
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TO: RULE-COMMENTS at 03SEC
CC: at Internet
Subject: Reference file no. S7-13-00
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Jonathan G. Katz, Secretary
Security and Exchange Commission
450 Fifth Street NW
Washington, DC 20549
Dear Sir:
This letter is in response to the Proposed Rule Governing Audit
Independence. I am a CPA and the managing shareholder in a local firm in
Mt. Sterling, Kentucky, a small town of 6,000 residents. Our firm has
approximately 20 audit clients, none of which are public companies under
SEC oversight. However, we still have several concerns which we believe
need to be expressed.
First of all, there are already safeguards in place to monitor this
issue. All CPA firms which prepare any type of financial statements
(audited or unaudited) are subject to an independent peer review every
three years. This review includes specific procedures to help determine
any lack of independence that might exist between the auditor and its
client. The American Institute of Certified Public Accountants (AICPA)
also provides technical assistance on a toll-free basis to help consult and
resolve practitioner questions on this issue.
History tells us that rules like the ones you propose often filter
down to other regulatory agencies, presumably in an effort to establish
some uniformity. Accordingly, even though my firm would not initially be
affected by new SEC rules, such rules might later be adopted by the FDIC, U
S Rural Development, HUD, IRS, or other agencies with which we work.
One-office firms such as ours (and that group comprises the majority of the
CPA practices in this country) don't have a staff of specialists to monitor
the deluge of regulations that can result from sweeping changes like you
propose. Worse yet, your proposals would be detrimental to clients such as
those we serve. Those clients need assistance from time to time in
accounting related matters.
What we have is a detailed knowledge of our clients' operations and
accounting systems, along with the proximity and quick response time to our
clients' needs. This enables to respond to our clients timely and
affordably. Of our 20 audit clients, only three have a skilled financial
controller or equivalent, and only one of them is a CPA. The majority of
our audit clients are small businesses, nonprofit organizations, or small
local governmental units with less in-house accounting expertise. We are
by far the most logical source of assistance in accounting matters because
of our knowledge of their accounting system and our location. Because
there are no other firms in our community capable of rendering many of the
services our clients might need, they would be forced to seek help from
firms in Lexington and Louisville, incurring travel costs, slower response
time, additional professional hours (due to orientation required by a new
firm) and generally higher hourly rates. None of these results are of any
benefit to these clients.
We comply with current independence rules regarding ownership, related
party transactions, loans to or from clients, and any other applicable
rules. Those alone create some problems which we are willing to accept.
For example, as auditor of two local banks, we already are forced to go to
out of town banks (with which we had no previous banking relationship) to
get a car loan or a mortgage loan. This creates some ill feelings among
our local banks with which we have deposit relationships. We understand
the reason for this and don't propose a change. However, we do believe
that the current SEC proposal is overkill and would cause some substantial
hardship for clients and CPA firms alike, particularly if it filters down
to other regulatory agencies. Such hardships might include increased
operating costs for clients and potential personnel layoffs for accounting
firms. Please be cognizant of the fact that some cures can be worse than
the perceived ailment.
Joseph C. King, CPA
Faulkner & King, PSC
Author: "Koch; Al" at Internet
Date: 09/13/2000 3:21 PM
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TO: RULE-COMMENTS at 03SEC
Subject: S7-13-00
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Gentlemen:
In general, I support the SEC's proposed rule-making with respect to auditor
independence.
Although it is not specifically enumerated, I believe the rule should
explicitly prohibit providing restructuring services on behalf of a client
company. Although such services should be covered under "management
functions" I question whether firms will seek to interpret their services
more narrowly. However, it is a clear conflict of interest for a firm that
also audits a company to advise on restructuring alternatives both outside
of bankruptcy or in a bankruptcy proceeding. In my experience,
restructuring alternatives require an objective assessment that cannot be
suitably attained if the advisor is also mindful of potential exposures
resulting from its previous auditing work.
I am a CPA but no longer practice in public accounting. As a result of my
CPA status, however, I am aware of the intense lobbying effort of the AICPA
and state CPA societies to defeat this proposed rule-making for reasons that
strike me more as self-serving rather than truly substantive. I expect that
some changes to your proposed rules are warranted; finding those that
warrant modification through the blizzard of objections from the CPA
industry will require some serious work.
Thank you for considering my comments.
Sincerely,
Al Koch
Albert A. Koch
1320 Trowbridge Road
Bloomfield Hills, MI 48304
248/358-4420
Author: "Elaine Langer" at Internet
Date: 09/13/2000 11:56 PM
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TO: RULE-COMMENTS at 03SEC
Subject: File # S7-13-00
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To Whom It May Concern:
I am sending this e-mail to voice my support for the SEC in its desire to
separate auditing functions from lucrative non-auditing services that
Independent Auditors provide for their client firms. It seems self-evident that
it is all too easy for an Independent Auditor to be influenced in a client's
favor, albeit not intentionally, when other, non-auditing, very lucrative
services provided to that same client may be affected by the outcome of the
audit, especially if the latter reveals any problems or discrepancies. Although
it would be very difficult to obtain "hard" evidence to "prove" this connection,
I believe it is only logical to suspect that this might be the case more than
most investors realize.
Sincerely,
Elaine Langer
1128 N. 27 St.
Allentown, PA 18104
eclanger@enter.net
Author: "L R S" at Internet
Date: 09/13/2000 11:17 AM
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TO: RULE-COMMENTS at 03SEC
CC: at Internet
Subject: AUDIT INDEPENDENCE - Reference file no. S7-13-00
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Gentlemen:
Please note my following concerns regarding the proposed rule governing audit
independence.
1. The comment period is too brief for the profession to adequately understand
its full impact.
2. The Independence Standards Board is already set up to address this issue.
3. The SEC may be acting without sufficient evidence that non-audit services
actually compromise audit quality or auditor independence.
4. There could be a negative impact on accounting firm's audit practice and
overall financial health.
Sincerely,
Charles A. Lawson, Managing Partner
Lawson, Rescinio, Schibell & Associates, P.C.
Email: lrs@monmouth.com
Author: "Melin; Peter B. CDR" at Internet
Date: 09/13/2000 4:47 PM
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TO: RULE-COMMENTS at 03SEC
Subject: Auditor Independence
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Count me in. Think the SEC is on the right track on this one. The fox
guarding the chicken coop comes to mind.
P. B. Melin
Author: at Internet
Date: 09/13/2000 1:41 PM
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TO: RULE-COMMENTS at 03SEC
CC: fedleg@aicpa.org at Internet
Subject: File #S7-13-00
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Gentlemen,
I wish to comment on the proposed rules from the Securities and Exchange
Commission regarding prohibiting non-audit services and audit services to be
provided by the same firm.
I wish to state that there is no evidence which points to the fact that
non-audit services have compromised audit quality or auditor independence.
Therefore, it seems like the commission is tryng to fix a problem which
DOESN'T EXIST.
There is also a larger "trickle-down effect" issue which would impact me
and my firm if this rule is passed. As you know, state boards of accountancy
generally adopt similar rules in order to "harmonize" with the SEC and this
would be very detrimental to our practice. We audit many construction
company clients as well as provide non-audit services throughout the year. If
we were not able to provide those non-audit services, it would greatly reduce
our income and have a negative effect on our firm. The non-audit services
throughout the year also enable us to provide more informed audit services
and to assist clients in making changes we recommend as a result of the
audit.
For the above reasons, I respectfully request that these rules NOT
be put into effect and that the situation be allowed to remain as it is.
Thank you for your consideration and I hope that the concerns of Certified
Public Accountants across the country will be heard and you will vote
accordingly.
Sincerely,
William E. North, CPA
Author: at Internet
Date: 09/13/2000 6:06 PM
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TO: RULE-COMMENTS at 03SEC
CC: fedleg@aicpa.org at Internet
CC: lgrumet@nysscpa.org at Internet
CC: kcarey@freedmaxick.com at Internet
CC: mbaritot@kpmg.com at Internet
Subject: File No:S7-13-00 Auditor Independence
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Dear Ladies and Gentlemen:
The proposed rule is an unnecessary and dangerous threat to business in
America. First, there is no empirical evidence that non-audit services
compromise audit quality or audit independence. In fact, I believe that the
rank and file CPA places the audit service above all others in the conduct of
his professional duties. We as a profession already live our lives and are
trained to focus on the issues of independence and audit quality.
Most non-audit services enhance the profitability of the clients we serve
during the audit, as a result of the knowledge gained from working with the
client. And the knowledge gained from many non-audit services provide an
opportunity to gain additional insight into the operations of our clients and
their industries, thereby creating some degree of audit improvement and
efficiency.
The Independence Standards Board is already established to properly address
independence issues.
I am deeply concerned of the "trickle down" effect that the Proposed Rule
Governing Audit Independence will have on small business, since such rules
are likely to be adopted by State Boards of Accountancy, with little or no
consideration of the cost to American Small Business.
Finally, I am afraid that the proposal will decimate the ranks of qualified
profesionals within CPA Firms. Our profession is already suffering from
declining numbers of entrants into the profession. By reducing the available
services a Firm can perform without impacting auditor independence, we run
the strong risk of narrowing even further the numbers of persons interested
exclusively in the art of auditing.
This proposed rule would be a significant setback to the efficiencies in
American business, and a slap in the face to all CPAs, who would be no longer
treated as professionals, but rather as slaves to a governmental bureaucracy.
Raymond M. Nowicki, CPA
Managing Partner
Nowicki and Company, LLP
3198 Union Road
Buffalo, NY 14227
716-681-6367
Author: "Ralph Ostermueller" at Internet
Date: 09/13/2000 2:22 PM
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TO: RULE-COMMENTS at 03SEC
Subject: S7-13-00
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SEC/Commissioner(s):
I'm a CPA who limits practice to Business Valuations, Litigation Support, M & A
and related Advisory Services. My state (MO) requires me to organize as a CPA
firm if I am going to use the CPA designation when I do my work. I provide no
audit, other attest or compliance -related tax return filing services, and I am
not presently affiliated by ownership or directorships or shared management,
overhead or fees/income with another CPA firm. I do belong to a national
affiliation/group of firms (The Financial Consulting Group, or "FCG") based on
common interests in performing to the highest standards in Business Valuations
and related practice.
I assume your general moves to, de facto, create "AUDIT ONLY" CPA firms and
prohibit businesses from using any other services from their CPA-Auditors are
intentioned to provide a more distant ( & potentially adversary?) relationship
between audited entities & their Auditors. However, your proposed "affiliates"
rules is too far reaching, and may well have unintended & seriously detrimental
consequences upon other aspects of business conduct, such as our FCG
affiliation.
Further, creating Audit-Only firms that rely almost completely on audit
relationships would create an environment where such firms aren't "economic-ly"
free to "fire" a client when such would otherwise be their choice.
Why not just extend the scope of the Federal Inspector General's office to your
chosen purview, & take CPAs out of the audit business? That way, they'd be free
to do all the profitable non-audit services, & you could achieve whatever degree
of audit independence/ regulatory control/ financial reporting that you feel is
appropriate to fulfill your mission using your own FED/Auditors, without having
the CPAs to deal with? I'm not kidding, here.
I hear nothing but complaints from CPAs about how 'audits" have become a
commodity. Do them a favor....prohibit them from auditing, & let the Feds do
it...perhaps under your control. The CPAs can then deal with IRS and SEC
"accounting" rules & regs as "advocates" for their clients, & they could handle
their clients' appeals and challenges of the rulings and reports by the new
"FED/AUDITOR" as they now do for their clients' IRS matters. And, you get to
police/rule-make the FED/AUDITOR's activities as you now do for the CPAs.
Under the above proposed system, the "auditors" are certainly independent of the
audited entities and would be an extension of your own wishes. The CPAs would
more profitable (albeit with much less volume of services) and you can hire all
their displaced "audit-only-interested" CPAs that might be available when the
CPAs lose all their audit clients.
Please don't do the present proposal, as constituted. It helps fewer ways than
it potentially harms. Please extend your considerations/deliberations, & be
bolder/ more creative with your solution approach.
Respectfully,
Ralph E. Ostermueller, CPA, ASA, ABV, CBA, CFE, MAE
The Ostermueller Group, LLC
12865 Crab Thicket Lane
St. Louis, MO 63131-2122
314-965-5921
314-821-3310(Fax)
http://www.ostermueller.com
Author: "trevorpeterson" at Internet
Date: 09/13/2000 10:39 PM
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TO: RULE-COMMENTS at 03SEC
Subject: S7-13-00
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I just wanted to let you know that I am very much opposed to the proposed SEC
rule regarding auditor independence. I think that it would do irreparable harm
to the accounting industry and damage what the profession has strived so hard to
achieve, the singular role of independent business advisors. Please reconsider
this very unwarranted and intrusive proposed regulation that would severely
affect an entire industry in a very detrimental way.
Thank you.
______________________
Trevor and Elaine Peterson
1538 Banyan Way
Knoxville, TN 37914
telephone: (865) 633-6540
e-mail: trevorpeterson@msn.com
Author: "John Prignano" at Internet
Date: 09/13/2000 9:07 PM
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TO: RULE-COMMENTS at 03SEC
Subject: Re: Comment File No. S7-13-00
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----- Original Message -----
From: Rule-Comments
To: John Prignano
Sent: Wednesday, September 13, 2000 1:27 PM
Subject: Re: Comment File No. S7-13-00
> please have your full name in the body of your comment. thanks.
>
>
> ______________________________ Reply Separator
_________________________________
> Subject: Comment File No. S7-13-00
> Author: "John Prignano" at Internet
> Date: 09/12/2000 6:25 PM
>
>
> As an individual investor, the integrity of the numbers in Forms 10-K,
10-Q,
> and firm earnings reports that made with the knowledge that the reported
> numbers will be compared to later 10-Qs, is important to me.
> The concerns of Mr. Bogle of the Vanguard Group, the assertions in
Matthew
> 6:24, and the suggestion of Mr. Biggs, Chairman and CEO of TIAA-CREF, that
> firms providing audit services should not provide consultant services to
the
> firms they audit nor provide audit services to the firms for which they
> provide consultant services merit implementation of a regulation with
severe
> penalties for violation of such a prohibition.
> Thank you for the opportunity to comment on the proposed regulation.
>
> John A. Prignano
>
Author: Carl Stachew at Internet
Date: 09/13/2000 8:02 PM
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TO: RULE-COMMENTS at 03SEC
Subject: File No. S7-13-00
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Dear SEC,
As an individual investor most of what I rely on is the
information contained in the annual reports, 10K's and
10Q's. I think it is paramount that the auditor's be
independent. The idea that other money is on the table
in the form of consultant fees is a supreme conflict of
interest. It just shouldn't be allowed. With more
people investing in the market these days the accuracy
of the financial numbers builds faith and trust with
the entire financial reporting system.
Sincerely,
Carl Stachew
Author: "Rich Thornton" at Internet
Date: 09/13/2000 11:57 AM
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TO: RULE-COMMENTS at 03SEC
Subject: S7-13-00
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The purpose of this e-mail is to protest the proposed SEC rule which will
prohibit non-audit services to CPA firm's attest clients. Our firm serves many
smaller SEC registrants that need considerable advice and assistance in order to
comply with SEC reporting rules. This rule proposed by the SEC seems
unnecessarily harsh and will leave us in a position where we are unable to
provide the services that benefit the client, the investor and the SEC as well.
Because the smaller registrants have financial limitations, they rely on their
CPA firm to perform the audit function and to advise them on the many policies
and controls they must follow in order to be successful in business and comply
with the many regulations set forth by the SEC and others. It will be nearly
impossible for these registrants to segregate their single CPA firm relationship
into multiple relationships in order to comply with the new independence rules.
CPA firms will be in a position where they will be forced to initiate
substantial fee increases and/or refuse to provide audit services due to these
regulations. CPA firms below the Big Five level will most likely stop serving
SEC registrants, which will further restrict access of smaller companies to
reasonably priced audit services.
The SEC has no evidence to support its position that the prohibited services
compromise independence. The new rules proposed by the SEC also make it
unlikely that even the largest audit firms will be able to retain the specialist
non-CPA experts that are necessary to perform quality audits-- both large and
small--in our current environment.
In summary, the proposed SEC rule will most assuredly be a detriment to the
investing public the SEC is supposed to protect, while also negatively impacting
access to auditing services and the quality of audits.
Regards,
Richard P. Thornton
Phone: (509) 248-7750
Fax: (509) 457-5204
E-mail: richt@mossadams.com
Author: "Nancy J. Tyrrell" at Internet
Date: 09/13/2000 10:37 AM
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TO: RULE-COMMENTS at 03SEC
Subject: S7-13-00
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I oppose the adpotion of the above noted proposal. It would have a very
adverse impact on both my business and my clients. My clients are all
small businesses who need non-audited services. They could not afford,
nor do they require auditing services. As a CPA, I strongly oppose the
adoption of this proposal. Thank you Nancy J. Tyrrell CPA
Author: "Mary T. Valenta" at Internet
Date: 09/13/2000 2:03 PM
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TO: RULE-COMMENTS at 03SEC
Subject: Proposal comments
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As a CPA, I am extremely concerned about the SEC's proposal to prohibit CPA
firms from providing non audit work for their audit clients. I have worked for
a CPA firm and have also been a client of CPA firms.
There are often times the CPA firm most familiar with the client is the best
candidate to provide non audit work. The SEC's proposal would prohibit this
leverage for both the CPA firm and the client.
Please do not approve these proposed rules. Thank you.
Mary T. Valenta
Author: Henry White at Internet
Date: 09/13/2000 2:36 PM
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TO: RULE-COMMENTS at 03SEC
Subject: Re: file # S7-13-00
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My full name is Henry L. White
> Subject: file # S7-13-00
> Author: Henry White at Internet
> Date: 09/12/2000 8:57 AM
>
> In response to the Proposed Rule Governing Audit Independence ,we as a
> small firm of 14 professionals have concerns as to the rules impact on
> our practice. Despite the fact that we do no SEC work at present we are
> concerned how this could impact our operations going forward. More
> specifically we need addressed: The comment period is not sufficient to
> determine overall impact. we understand that the Independence Standards
> Board is already setup to address this issue. We have concern that the
> SEC is acting without sufficient evidence that non-audit services have
> an effect on auditor independence and finally how could this affect the
> financial stability of our practice and our ability to offer a full
> range of services to our clients. Thank you for your further
> consideration of this important issue affecting our profession.
>
>
Author: at Internet
Date: 09/13/2000 1:41 PM
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TO: RULE-COMMENTS at 03SEC
CC: fedleg@aicpa.org at Internet
Subject: File #S7-13-00
------------------------------- Message Contents
Gentlemen,
I wish to comment on the proposed rules from the Securities and Exchange
Commission regarding prohibiting non-audit services and audit services to be
provided by the same firm.
I wish to state that there is no evidence which points to the fact that
non-audit services have compromised audit quality or auditor independence.
Therefore, it seems like the commission is tryng to fix a problem which
DOESN'T EXIST.
There is also a larger "trickle-down effect" issue which would impact me
and my firm if this rule is passed. As you know, state boards of accountancy
generally adopt similar rules in order to "harmonize" with the SEC and this
would be very detrimental to our practice. We audit many construction
company clients as well as provide non-audit services throughout the year.
The non-audit services through-out the year enable us to provide more
informed audit services and to assist clients in making changes we recommend
as a result of the audit.
For the above reasons, I respectfully request that these rules NOT
be put into effect and that the situation be allowed to remain as it is.
Thank you for your consideration and I hope that the concerns of Certified
Public Accountants across the country will be heard and you will vote
accordingly.
Sincerely,
Judith
C. Wilson, CPA
Author: "Cheryl Woods or Kate Woods" at Internet
Date: 09/13/2000 6:59 PM
Normal
TO: RULE-COMMENTS at 03SEC
TO: "Patty Murray" at Internet
CC: "AICPA Federal Legislation Committee" at Internet
Subject: S7-13-00
------------------------------- Message Contents
I feel compelled to contact you regarding one more example of government
over-reaction which will yield only detrimental consequences.
The SEC has proposed radical new rules relating to auditor independence. Upon
cursory review, one might feel that the rules will only apply to SEC clients and
auditing firms; however, a close review of the proposed rules gives one another
perspective entirely.
I am a CPA in "rural America" (Eastern Washington), with only small business
clients, and I can see a real possibility that these rules will affect both me
and my clients. Historically, SEC regulations have set a precedent for other
regulators - the Dept. of Labor, Banking regulators, state and local governments
and State Boards of Accountancy. Any trickle-down effect from these regulations
would impact all businesses.
There are some very good items in the SEC's proposal - items that really need to
be addressed, i.e. the long-overdue modernization of financial interest and
family rules. However, these should not be tied to ill-thought-out,
controversial proposals such as the scope of services initiative. Modernization
of the financial-interest standards can and should occur on an expedited basis,
independent of the scope of services initiative.
In reviewing the proposal, it is apparent that the SEC has proceeded without
facts or evidence. The SEC itself admits that there is no empirical evidence
that non-audit services have compromised audit quality or auditor independence,
nor ever caused an audit failure. None of the studies or reports cited by the
SEC concluded that the scope of services impaired audit effectiveness, or that
an exclusionary ban was necessary or appropriate. If there is no problem, why
is there a "solution" being proposed?
The SEC has ignored the conclusion of the current Panel on Audit Effectiveness
of the Public Oversight Board - a panel that was formed at the request of the
SEC! The panel said it could find no evidence that the provision of non-audit
services has hurt audit quality - in fact, it concluded that in numerous
instances, non-audit services contributed to a more effective audit.
The SEC proposal is not good for industry, since it would restrict public
companies' freedom of choice when seeking outside professional services. A
public company would be constantly forced to choose whether to hire a firm
solely as its auditor or solely as a provider of other services. The SEC claims
that the proposed rule "would not affect tax-related services" to audit clients.
However, it would ban acting as an advocate for an audit client, or providing
expert services in administrative proceedings, thus (except in preparing
returns) potentially prohibiting CPAs from representing audit clients before the
IRS.
In its rush to regulated, the SEC has:
**Adopted a schedule designed to avoid Congressional oversight and preclude
meaningful public participation.
**Waited until the eleventh hour of the Clinton Administration to push
through a radical rule to restructure the accounting profession, without
permitting informed oversight, or policy participation, by Congress or the new
Administration. In each of the last 10 annual reports to Congress, the SEC has
not mentioned any concerns about the scope of services issue.
**Limited to 75 days the period for commenting on a far-reaching and highly
complex proposal, including responding to more than 400 questions, collecting
and analyzing a great deal of data and considering alternative concepts for
regulating auditor independence.
**Pre-empted the work of the ISB, set up three years ago at the initiative
of the SEC to develop a new conceptual framework for auditor independence and
appropriate implementing standards.
**Not allowed time for important recent reforms to work, including the new
disclosure and audit committee requirements adopted by the ISB, the NYSE, the
NASD, the American Stock Exchange and the SEC.
The SEC lacks authority for its sweeping scope of services rule. The statutory
provisions cited by the SEC in the proposed rule pertain to public companies'
filing of financial statements that have been audited by independent accountants
and do not expressly authorize the SEC to make rules governing or regulating
directly the accounting profession itself. The proposed rule is based primarily
on alleged concerns relating to the "appearance of independence", but not
independence in fact. The SEC does not have the statutory authority to impose
restrictions because of possible perceptions about independence.
Board restrictions on non-audit services will likely have the perverse effect of
undermining auditor independence by making audit firms overly or exclusively
dependent on auditing fees, which would certainly be contrary to the public
interest. Such restrictions will also harm the recruitment and retention of the
most qualified personnel, causing a possible degradation in audit quality.
In conclusion, the SEC's proposal to restrict the services offered by accounting
firms represents a fundamental restructuring of a profession that has
successfully given investors the reliable, independent data they need for the
past century. A decision by a government agency to tell some business
organizations what services they may offer and to tell other businesses from
whom they can buy services is an extraordinary economic intervention without any
empirical or other basis. I am sure that most Americans would find this public
policy as only more freedoms being taken away by a government out of control.
This scope of services rule must not be allowed to go forward.
Cheryl K. Woods, CPA
550 Woods Road
Centerville, WA 98613
Author: "Sharon L. Yorker" at Internet
Date: 09/13/2000 1:41 PM
Normal
TO: RULE-COMMENTS at 03SEC
CC: "'kit_bond@bond.senate.gov'" at Internet
CC: "'john_ashcroft@ashcroft.senate.gov'" at Internet
CC: "'gephardt@mail.house.gov'" at Internet
Subject: S7-13-00
------------------------------- Message Contents
This letter is to express my objections to the SEC proposed rule referred to
above. As a CPA in public practice, I object to this rule which would severely
limit the non-audit services which a CPA firm could perform for a client who is
also an audit client. Even though our firm does not audit SEC registrants, I
fear that we, and our whole industry, could be adversely affected by this
proposed rule. If this rule should be seen as a model for independence
standards, other regulatory agencies, such as the state boards of accountancy,
could adopt similar rules which would impact us all. I have seen nothing which
shows that such a rule is necessary or even desirable to protect the
independence of auditors. The knowledge of a company which is gained by
performing other services for them can help a great deal in successfully
planning and executing an audit. I wish to add my protest to others from inside
and outside the industry and ask that you reconsider adopting this rule whi!
ch could threaten our livelihood
and throw our whole industry into chaos.
Sharon Yorker
Grace Advisors, Inc.
314-615-1274
sly@grace1.com
CONFIDENTIALITY NOTICE: This e-mail and any attachments may contain
confidential information. If you are not the named recipient, please notify
Sharon Yorker immediately at 314-615-1274 and delete the message without
disclosing the contents to anyone, using them for any purpose or storing or
copying the information in any medium.
http://www.sec.gov/rules/proposed/s71300/0913b01.htm
