Ladies and Gentlemen:

I am writing in response to the Security and Exchange Commission's proposal to severely restrict the ability of public accountants to provide consulting and internal auditing services to SEC registrants while also acting as their auditors. This proposal raises serious issues in my view, which after consideration, should result in the rejection of this proposal.

The SEC contends public accountants who also provide consulting services to their clients lack independence, whereupon CPA's may be tempted to side with their clients on difficult or contentious accounting issues. As a matter of practice, audit fees for SEC registrants represent only a portion of the fee earned from SEC registrants. Normally, the audit services are provided by business assurance professionals, and other individuals specializing in consulting provide those services.

The diversity of individuals, separation of engagement teams, and multiple revenue sources result in stronger accounting firms. Stronger accounting firms are better able to stand up to clients.

I believe that proposed changes of this nature could weaken the accounting profession and the auditing of SEC registrants. Any proposed change should be supported by extensive, empirical evidence rather than anecdotal, intuition or subjective decisions about how an auditor interrelates with his clients. The diversity of fees noted above allows an auditor to have a wider base of revenue and enables him to walk away from audit engagements that might otherwise be too important in terms of fees to that firm's revenue structure. Firms with only one source of revenue (i.e. audit fees) would be particularly vulnerable to the pressures of clients in the auditing environment.

In my view, the SEC is over-reaching in trying to solve a problem that is not readily apparent. By diminishing the services that CPA firms may offer and its revenue base, the SEC would undermine the strength of the profession. The strength of the profession is built upon the quality and diversity of its people, and its ability to attract the most talented professionals possible.

This proposal would result in the creation of firms with auditing as its sole purpose which would necessarily result in an exodus of existing talent, a degradation of existing peer groups within firms, and an increased challenge in the hiring of new, promising professionals.

Consideration should also be given to the possible domino effect these rules would have on other institutions not currently regulated by the SEC. Often times, regulators in other industries will follow the most stringent requirements of its peer group, that is, other regulators. This impact on other industries, such as banking, not-for-profit, and many others, could have the effect of causing those regulatory bodies to adopt the same rules. Many of these companies need the assistance of their CPA firms to provide a wide range of services at a very reasonable cost to enable them to get the toehold they need to enter into the regulatory environments in which they work. This proposal by the SEC would have the affect of increasing the cost of services to registrants as well as possibly increasing the cost of doing business to others operating in other industries. Such an increase in cost would have the effect of stifling competition, making barriers higher to enter into the public environment, thereby increasing the cost of capital and hampering innovation and the dreams of new entrepreneurs seeking to develop markets and products for those markets.

It is my view that this proposed regulation should be withdrawn permanently. However, any change in these regulations should only be taken after appropriate due process, hearings, and complete opportunity for comment and education to those who can influence the decision making process.


B. Bryan Cartwright, CPA