August 25, 2000

Dear SEC Commissioner:

I am writing as an educator to give you an academic's perspective on your proposed auditor independence requirements. I am a professor at Brigham Young University, am the past president of the American Accounting Association, and am the national president-elect of Beta Alpha Psi, the accounting student honors fraternity. In addition, I am chair of the AACSB accounting accreditation committee and just completed a major study of the future of accounting education. In conducting the study, we interviewed business leaders, held focus groups across the U.S. and distributed approximately 4000 questionnaires of which over 1,000 were returned.

While many of your proposed rules are positive, there is one aspect of the proposal that will have a devastating impact on the future viability of accounting programs, the quality of students and even the quality of audits in the United States.

Currently, we are experiencing significant difficulty attracting the best and brightest students into our accounting programs. Consider the following facts:

The major reason fewer bright students are studying accounting is because accounting is perceived as being narrow and limiting, whereas other business careers are seen as more rewarding and exciting.

If you are successful in enacting your proposed rules which prohibit accounting firms that audit clients from performing non-audit services, I am confident that you will cause further and dramatic declines in the quality and quantity to students wanting to become accountants and auditors. Students are not excited about entering a field that is becoming narrower and more limiting in scope. Unfortunately, with poorer quality and fewer students going into accounting, the result will be poorer quality financial statement audits in the U.S. I would diagram the problem as follows:

It seems to me that you are faced with competing tensions and fears-removing perceived conflicts of interests of accountants performing audits, which requires a narrowing of scope of services, or having poorer quality professionals conducting audits. Having studied closely many audit failures (both as a researcher and as an expert witness), my strong impression is that it was not a conflict of interest that caused "alleged audit failures," but rather auditors who could not think analytically, see the big business picture, and communicate and remain firm in their concerns about management and other client issues.

I am trying to be objective about your proposal-I have no vested interest in either protecting the status quo or narrowing auditor scope of services. However, I fear that your proposed rules that are designed to narrow audit services and improve the quality of audits may have exactly the opposite effect of resulting in poorer quality audits in the U.S.

Thanks for allowing me to respond. I wish you success in your deliberations.


W. Steve Albrecht
Professor and Associate Dean,
Marriott School of Management
Brigham Young University