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:    09/24/2000  9:00 AM
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TO: RULE-COMMENTS at 03SEC
Subject: File # S7-13-00
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After 30 years as an internal auditor at a large regional bank, your 
proposed rules regrding external auditor independence come as a "breath of 
fresh air".  While working with "Big Eight" public accounting firms over 
those years revealed no overt incidents of malicious self-interest, I often 
questioned their objectivity, as public accountants, in areas relating to 
accounting and application systems with which there firm was involved in 
programming, design and implementation.  It is encouraging to see that your 
proposals would cover this, and many other circumstances which could put 
into question the objectivivity and integrity of the public accounting 
profession.
     

    Author:  "Robert A. Dunlap"  at Internet
Date:    09/24/2000  8:54 PM
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TO: RULE-COMMENTS at 03SEC
Subject: Reference file no. S7-13-00
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As a partner in a local, five partner CPA firm, I believe there are many 
unanswered questions concerning the impact on small firms and their clients from
the ripple effect resulting from consulting practice limitations the SEC is 
proposing for large firms.  Consequently, there needs to be more study and time 
for comment before the rule is imposed.
     
While I will acknowledge that there is reason for concern in the area of 
independence based on factors revealed in recent cases involving the Big 5 firms
and their clients, the proposed rules may not be in the public interest by the 
time the rules filter down to the smaller firms and their clients.  Due to 
practical economic limitations of small business, it is not uncommon for them to
outsource some technical aspects of their business compliance or recordkeeping 
obligations, such as income tax planning and preparation, payroll preparation 
and reporting, etc.  In many smaller communities, the sources for such services 
are somewhat limited.  Also, I expect that a study would find that for the 
smaller firms, an unhealthy excess of consulting service fees over the related 
audit fee is extremely rare.
     
Our firm performs payroll preparation and reporting services for a local, one 
location bank which is also an audit client.  The bank's reasons for having us 
provide this service is to aid them in the confidentiality of their payroll and 
to minimize incidents of minor reporting errors and the resulting 
correspondence.  The total annual fee for the payroll service is well under ten 
percent of the audit fee.  If the rule filters down to the local level, and it 
appears that is the direction observers see this matter going, the small bank 
will not be well served and independence in this instance is not compromised 
with or without the rule.
     
I strongly urge the SEC to study this matter more carefully to avoid a solution 
that will create more problems than it solves.
     
R. Andrew Dunlap, CPA
Managing Partner, Snodgrass, Dunlap & Company, CPA's 
P. O. Box 768, Iola, Kansas 66749
(316) 365-3125
Firm E-Mail address - SDCO@aceks.com    
     

    Author:  "Mary Mavity McFadden"  at Internet
Date:    09/24/2000  10:34 PM
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TO: RULE-COMMENTS at 03SEC
Subject: Reference File No.: S7-13-00
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My name is Mary McFadden and I am a CPA in the state of MD.
     
I doubt you will receive many opinions such as mine.  I worked in a 
corporate environment for a number of years and always felt our audit firm 
was "in bed" with the client.  Whenever the revenues are substantial, it 
will always be difficult for some to balance their ethical responsibilities 
with their need to generate revenue.
     
I believe that the government should hire auditors and perform audits for 
the SEC.  Basically, this is the only way around the dilemma.
     
     
Mary J. McFadden
     

    Author:   at Internet
Date:    09/24/2000  7:47 PM
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TO: RULE-COMMENTS at 03SEC
Subject: File%20Number%20S7-13-00%20Auditor%20Independence
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Dear Sirs: 
          Independence is of primary and paramount concern and its obvious 
need should not be taken lightly. However, the proposed changes and their 
possible ramifications are akin to killing a fly with a hammer. The proposed 
change has the chilling effect of potentially forcing many small, medium 
sized and regional accounting firms to eliminate auditing from their menu of 
services. In a firm such as my present employer for the last seventeen years, 
many of our clients frequently depend on us to explain tax forms, IRS 
regulations, accounting principles and their application and other "nonaudit" 
queries. These clients often have outstanding bookkeepers but infrequent 
contact with professional accountants except an auditor. Since auditing is 
not the largest part of many firms of our size the availability of auditors 
will diminish. As it diminishes the price will increase to cover the loss of 
revenue from the ability to provide other services such as tax research and 
because the law of supply and demand. The less auditors in the profession the 
greater the cost of an audit.
            Through other factors we are already experiencing a shortage of 
interest in the accounting profession. This is being exacerbated by the 
recent implementation in many states of the 150 rule for licensure. The 
proposed change in the independence rules may serve as a long term death 
knell.
            Thank-you for the opportunity to express my opinion.
     
Sincerely,
     
Albert A. Presto,  CPA
Commonwealth of Pennsylvania