U.S. Securities & Exchange Commission
SEC Seal
Home | Previous Page
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: at Internet Date: 09/24/2000 9:00 AM Normal TO: RULE-COMMENTS at 03SEC Subject: File # S7-13-00 ------------------------------- Message Contents 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 Normal TO: RULE-COMMENTS at 03SEC Subject: Reference file no. S7-13-00 ------------------------------- Message Contents 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 Normal TO: RULE-COMMENTS at 03SEC Subject: Reference File No.: S7-13-00 ------------------------------- Message Contents 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 Normal TO: RULE-COMMENTS at 03SEC Subject: File%20Number%20S7-13-00%20Auditor%20Independence ------------------------------- Message Contents 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