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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: "Annie DeCelle" at Internet Date: 09/25/2000 2:23 PM Normal TO: RULE-COMMENTS at 03SEC CC: at Internet Subject: S7-13-00 ------------------------------- Message Contents 716 Old Mill Road Pittsburgh, PA 15238 September 15, 2000 Mr. Jonathon Katz, Secretary Securities Exchange Commission 450 Fifth Street, N. W. Washington, D.C. 20549-0609 Dear Mr. Katz: I am a Certified Public Accountant (CPA) writing to express my disagreement with the proposed regulation by the Securities Exchange Commission (SEC) to govern the CPA profession's independence. With the growing global economy, the CPA profession has expanded to continue to meet the needs its clients. The SEC's concerns about those changes should be addressed using the vehicles in place between the SEC and the American Institute of CPA's (AICPA). Those vehicles will continue to be circumvented if the proposed regulations are passed. If the SEC were to work more in conjunction with the AICPA and those in the profession, it would realize there are far reaching negative implications of implementing these regulations. It is understandable that the SEC has concerns regarding independence of CPA 's. However, the profession has a history of working with other organizations, including the SEC, to address issues, with the AICPA making the final decisions to govern the CPA profession. It would be in the best interest of the profession, the SEC, the clients, and the investors of its clients, to continue in that vein. It is not the role of the SEC to govern any profession other than those directly involved in the issuance and trading of securities. Allowing the SEC or other entities to govern the CPA profession would undermine the very independence we are trying to protect. Like the SEC, I also believe in protecting the best interests of investors in American securities. But the current proposal will negatively impact the corporations we serve, the same companies whose investors the SEC is trying to protect. As a CPA who worked in public practice for six years, providing audit, tax and consulting services to my clients, I can attest that knowing one aspect (like auditing for example) of the business of a client makes me a more knowledgeable professional to more cost effectively offer the client services in other disciplines of accounting (like consulting on accounting system issues). To affectively audit any business a CPA must become educated in the specifics of that business. So it makes sense to enable the client to utilize that same firm for other services. The proposed regulation eliminates that option for the client since it requires the client to utilize another firm for non-audit services. So both firms would bill the client for the time to acquire knowledge of its business, instead of just one. The need for the client to pay more to obtain quality services will affect the clients' ability to provide cost effective operations. This will change their ability to continually provide earnings that will protect the investments of securities holders. And the lack of consulting fees to audit firms will create a profession that has less financial ability to attract and retain a quality work force. The CPA profession's ability to attract and retain a quality workforce will also be limited by the proposed regulations since it limits the opportunities available to accountants: if accountants can only work in auditing, they may select other jobs where more diverse opportunities exist. Depleting the profession's ability to attract and retain qualified professionals will result in less quality audit services being provided to the clients which in turn leaves investors at greater risk. Here is another example of the proposed regulation that would create a great disservice to clients. As a CPA serving a client base of various companies I can offer clients a wealth of experience that they may not have on their staff. I acquired that experience by working for different clients in different businesses and industries and assisting them in both dealing with their business issues and in auditing their businesses. That knowledge is very valuable to clients, especially those who may have management that have only had a single or few employers. Although the business decisions are the clients, the availability of information of CPA's who have worked with multiple clients enables companies to make more informed decisions. For example, I have seen clients with various financial systems and know the capabilities and limitations of various software packages because of my experience. This knowledge, when shared with a client, could save the client valuable time in researching options and provide real-life experiences about the systems' abilities and limitations. This may prevent a client from making a decision to purchase a system based solely on what it is told by vendors who do not always share weaknesses in their product offerings. I would not want to make the software selection decision for my client, but my knowledge would provide valuable information to enable it to make a more informed decision, increasing its ability to financially succeed. The current proposal of the SEC would prohibit CPA's from assisting clients with financial information systems design and implementation. . I believe further analysis is needed to determine the true drivers of independence that the SEC believes are in jeopardy of being breached. Those issues and proposed solutions to concerns should be addressed specifically and individually, not with broad sweeping regulations that create more expenses for the clients and more risk for investors. And the final decision on how those issues are governed by the CPA profession should be made by the AICPA, not the SEC. This will enable CPA's to maintain their independence and continue to provide the quality services. Sincerely, Maryanne DeCelle, CPA


Author: "SUSAN EZEKIEL" at Internet Date: 09/25/2000 7:20 AM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents ** High Priority ** I am a CPA in a local firm. I am in opposition to the SEC proposed guidelines to limit the scope of services performed by accounting firms. Frequently, the non audit services needed by an audit client are designed to increase productivity or profitability of the audit client. Who better to offer in depth, concise coaching than the firm who has studied and audited the company. To not allow the audit firm to provide these much needed services would be a disservice to the company and ultimately to the shareholders who would be forced to pay a higher price for these services. This is due to the fact that the second CPA firm would be required to begin at "square one" in order to obtain an understanding of the audit client, something that would be readily available to the audit firm. Any doubt about the CPA firm's independence on the non-audit engagement is already addressed in the existing ethical and professional rules already established. To further add restrictions would place an undue burden on the audit company and ultimately the public. Sincerely, Susan C. Ezekiel, CPA Cobb Ezekiel Brown & Company, P.A. P. O. Box 387 Graham, NC 27253 susan@ceb-pa.com


Author: at Internet Date: 09/25/2000 6:54 AM Normal TO: RULE-COMMENTS at 03SEC Subject: File No. S7-13-00 ------------------------------- Message Contents Dear Mr. Jonathan G. 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. 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. 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 a 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. In addition, we must also look deeper and review services such as financial information systems design and implementation, appraisal or valuation services, actuarial services, human resources and many management functions. I believe that auditors cannot function as part of client management and remain independent. It is human nature, especially when fees are involved. The proposed SEC rule amendments regarding auditor independence helps to strengthen our profession. 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. Sincerely Todd M. Havens


Author: at Internet Date: 09/25/2000 9:46 AM Normal TO: RULE-COMMENTS at 03SEC Subject: S7-13-00 ------------------------------- Message Contents I wish to express to you my comments regarding independence of Certified Public Accounts performing audits and also performing other services such as consulting. My firm is a local firm and we do not perform audits for SEC clients. My objection to the contemplated proposal is that it will eventually curtail our ability to perform audits and also offer management consulting, estate planning for the owners and even bookkeeping services where all that we do is post the client's prepared information just as the client gives it to us. I certainly feel that our independence is not jeopardized in any way by our offering these other services to our clients. I respectfully request that you reconsider your position on this Independence issue in S7-13-00. Sincerely,] Broadus L. Smith, C.P.A.


http://www.sec.gov/rules/proposed/s71300/0925b03.htm


Modified:10/04/2000