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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: CHAIRMANOFFICE at SEC1 Date: 09/20/2000 11:45 AM Normal TO: Rule-Comments at 03SEC Subject: Auditor Independence ------------------------------- Message Contents ______________________________ Forward Header __________________________________ Subject: Auditor Independence Author: "C. Richard Baker" at Internet Date: 09/19/2000 5:29 PM Dear Chairman Levitt, I have been a professor of accounting and auditing for over 20 years. I want to express my strong support for your attempts to increase the level of independence of the auditing profession, and in particular that of the Big 5 firms who audit virtually all companies with publicly traded securities in the United States. In effect, the Big 5 firms have abdicated their public interest responsiblity in pursuit of increased wealth for themselves. The Securities Acts and the various state securities laws granted a monopoly of practice to Certified Public Accountants so that investors would be able to receive reliable, unbiased and credible information for the purpose of making informed investment and credit decisions. The Big 5 firms are increasingly involved as close business advisors to their clients, thus compromising their objectivity and independence. Not only should auditors of companies with publicaly traded securities be circumscribed in their abilities to offer a myriad of services to audit clients, there also should be a strongly increased barrier between top management of client firms and the hiring process that determines which audit firm is engaged, the nature and scope of services to be performed, and the amount of the audit fee. Moreover, the regulation of the audit profession should be in the hands of an independent regulator structure . The Independent Standards Board and the Public Oversight Board as presently constituted do not achieve this end. Both bodies should be completely independent of the AICPA and the large firms. Sincerely yours, C. Richard Baker Associate Professor University of Massachusetts Dartmouth North Dartmouth, MA 02747 E-mail: rbaker@umassd.edu Phone: (508) 999-9243

Author: "Dave Hockett" at Internet Date: 09/20/2000 6:04 PM Normal TO: RULE-COMMENTS at 03SEC Subject: S7-13-00 ------------------------------- Message Contents I'm writing to protest the proposed SEC rule prohibiting non-audit services to CPA firm's attest clients. My firm serves smaller SEC registrants that require considerable hand holding to comply with SEC reporting rules. The draconian rule proposed by the SEC will effectively eliminate our ability to provide this service, which benefits the SEC, the client and the investing public. Small registrants cannot afford to hire the expertise necessary to comply with the many regulations promulgated by the SEC and other regulators. They rely on their CPA firms to perform not only the audit function but also advise them on the many systems, controls and policies they must follow in order to be successful in business and comply with the regulations. It will be next to impossible for these enterprises to segregate their single CPA firm relationship into multiple relationships in order to comply with the new independence rules. CPA's will refuse to provide audit services or require excessive fee increases due to the inefficiencies imposed by these regulations. Most CPA firms below the Big Five in sizes will stop serving SEC registrants, further restricting the access of smaller companies to reasonably priced audit services. The SEC has proposed these new rules with no empirical evidence to support its presumption that the prohibited services compromise independence. This proposal also makes it likely that even the largest audit firms will not be able to retain the specialist non-CPA experts that are necessary in today's technology driven environment to perform quality audits of large and small enterprises. This quest for theoretical purity will surely reduce the quality of audits, limit access to auditing services and hurt the investing public that the SEC is supposed to protect. Regards, Dave Hockett, CPA

Author: bill hosmon at Internet Date: 09/20/2000 11:19 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents I support the proposed Auditor Independence rule. Auditors should be kept separate from consulting contracts. Bill Hosmon 3334 Rosedale Ann Arbor, MI 48108

Author: John McNulty at Internet Date: 09/20/2000 5:51 PM Normal TO: RULE-COMMENTS at 03SEC Subject: S7-13-00 ------------------------------- Message Contents Dear SEC: Your proposed rules to limit the scope of services of accountants is extremely unfair. You are overreaching your authority. This proposed rule will do severe damage to the accounting profession if it is allowed to become law. Most small accounting firms do not do SEC work, but eventually all small accounting firms will be negatively impacted because these rules tend to filter down into state regulation. This will further weaken the CPA licensees and slowly but surely kill the profession. All the good people will choose other professions. Eventually, the SEC will be negatively impacted because audit quality and efficiency will erode. Audit firms will be dull lifeless monopolistic bureaucracies under heavy regulation, scandals will erupt, corruption will seep into the diseased and broken system. Please reject this proposal now. Sincerely, John McNulty

Author: Steven Pullara at Internet Date: 09/20/2000 3:53 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 Attention Jonathan G. Katz, Secretary ------------------------------- Message Contents Dear Mr. Katz: The purpose of this e-mail is to comment on SEC proposed rules regarding auditor independence. I have two concerns. First, I don't believe that performing non-audit services such as bookkeeping, human resource consulting services (such as recruiting and designing compensation packages), and financial information technology services (such as designing and implementing financial information services) impair an auditor's independence (either in fact or appearance) in situations where the client's senior management must review and approve suggestions and recommendations made by the consultant before implementation. In situations where the consultant is actually making management decisions on behalf of the client's management (for example in hiring senior management positions), I would agree that auditor independence would be impaired. Second, I have concerns that this ruling could negatively impact both the effectiveness of the CPA firm and the services received by the client (i.e. higher price and lower quality service from multiple service providers). I think this is an even bigger concern if similar independence rules eventually apply to the entire public and private accounting profession if various state licensing agencies adopt the same rule as the proposed SEC rule. Thank you in advance for considering my comments. Sincerely, Steven A. Pullara, CPA Partner Smith & Gesteland, LLP www.sgcpa.com

Author: at Internet Date: 09/20/2000 3:57 PM Normal TO: RULE-COMMENTS at 03SEC Subject: Opposition to S7-13-00 ------------------------------- Message Contents I wish to oppose the proposed regulation for a variety of reasons. The primary concern is that CPA- Auditors should be able to render non-audit services to their audit clients as long as there is no impermissible conflict of interest or issues relating to a negative impact on the independence of the CPA regarding the audit. It is my opinion that such auditor conduct is currently adequately regulated by the professional ethical requirements under voluntary organizations such as the AICPA, the state accountancy boards and related state statutes as well as current SEC pronouncements. In addition, tax services are also highly regulated by various agencies including the IRS. I believe that the current SEC proposed regulation is over-inclusive and is an overreach into this already highly regulated industry. To adopt this regulation will inevitably cause a flight of firms leaving the less profitable and more high risk area (from legal liability standpoint) of auditing in favor of consulting and related services. This will cause a higher price to be paid by the shareholders of audited entities in their company's effort to seek out qualified auditors who are agreeable to forego their consultancy practice in favor of the now more highly regulated audit field. Sincerely Yours, Ronald N. Serota CPA 1050 E. Flamingo Rd., Ste. E227 Las Vegas, Nevada 89119

Author: "BARBARA TAYLOR" at Internet Date: 09/20/2000 4:18 PM Normal TO: RULE-COMMENTS at 03SEC Subject: Re: SEC proposed ruling ------------------------------- Message Contents > > > S7-13-00_ > > This is crazy - how many different organizations do you need involved in > your business? >

Author: at Internet Date: 09/20/2000 10:04 PM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents September 18, 2000 Mr. Jonathan G. Katz, Secretary Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549-0609 Re: File No. S7-13-00 Revision of the Commission's Auditor Independence Requirements Dear Mr. Katz: I want to offer my support for the changes the Commission is proposing for auditor independence. I commend you and your committee for this initiative aimed at improving and modernizing the public accounting profession. My years of experience have taught me that two of the most important qualities in our profession are reliability and integrity. I have also learned that perception is often times as important as reality. The work done by public accountants must be both independent and perceived by investors and others in the public arena as independent. Anything that compromises that position should not be tolerated as our financial markets, indeed our entire business community, rely totally on this position to function. I believe auditor independence will be best achieved by curbing the proliferation of non-audit services provided by a public accounting firm to its audit clients. I think an outright ban on these non-audit services is the only way to guarantee compliance. There are plenty of non-audit clients that audit firms can pursue to provide their non-audit services. At a minimum, the proposed proxy disclosure requirements will help the public understand the relationship an entity has with its public accounting firm. There are many non-audit services that could, potentially, impair independence. Certainly any outsourcing of the internal audit function to the organization's external auditing firm impairs independence. But we must also look deeper and review the services that are not so obvious in their ability to impair independence. Services such as financial information systems design and implementation, appraisal or valuation services, actuarial services, human resources and many management functions must also be reviewed. I have always believed that auditors cannot function as a part of client management and remain independent. It is human nature, especially when fees are involved. Now is the time to strengthen and modernize our profession and the proposed SEC rule amendments regarding auditor independence do just that. I urge you to go forward with these needed changes including the relaxing of restrictions on investment and employment imputed to a public accounting firm. Thank you and all the Commissioners, I look forward to working under the new guidelines. Sincerely, Brian K. White CPA - State of Texas