Date:    08/03/2000  2:45 PM

Subject: Comment on File No. S7-13-00 Auditor Independence Requiremen

I have two comments regarding the proposed rules governing independent 
auditors, the second item of which is a follow-up to my telephone 
conversation with John Capone.
     
The first involves the potential prohibition regarding tax filings and 
related tax work. We link the auditing of our annual financial 
statements with the filing of our tax returns. Since our shareholders 
benefit when the independent auditor audits both out annual financial 
reports and our tax filings, and since it would cost more money (and 
thus hurt our shareholders) to have two separate independent auditors 
(one for tax, one for financial statements), the proposed rules needs to 
clearly permit a single independent auditor to audit both the annual 
financial statements and prepare the tax filings.
     
The second point of concern involves a potential conflict of interest 
apparently not addressed in the proposed rule. Specifically, it would 
involve the hypothetical case where the independent auditor competes with 
the audit client. (The rules speak only of the situation where the 
indepedent auditor is compensating for selling or referring business to 
the audit client). Here, I am thinking of the growing number of CPA firms 
which (depending on which state they do business in) offer investment 
management services and who also act as independent auditors for 
registered investment companies. In this case, a potential conflict 
exists where, in being compensated for offering competing services, the 
independent auditor can potential accrue a financial gain by issuing an 
unfavorable "independent" auditors report regarding the competing mutual 
fund it audits.
     
I believe this second issue will become increasingly relavant among 
mutual fund independent auditors as more states allow CPA firms to 
recieve investment management fees. The SEC should specifically address 
in the proposed rules.
     
- Chris Carosa