Date:    08/17/2000  5:48 PM

Subject: S7-13-00

     
      The SEC has based its decision to move forward with this rule
prohibiting non-audit services without facts or evidence.  Even the SEC 
admits that there is no empirical evidence that non-audit services have 
compromised audit quality or auditor independence, nor ever caused an audit 
failure.  None of the studies or reports cited by the SEC concluded that the 
scope of services impaired audit effectiveness, or that an exclusionary ban 
was necessary or appropriate.  The SEC's proposed rule is a solution in 
search of a problem.
     
        The SEC ignored the conclusion of the current Panel on Audit
Effectiveness
of the Public Oversight Board, a panel that was formed at the request of the 
SEC.  The panel concluded that, "both the profession and the quality of 
audits are fundamentally sound."  The panel said it could find no evidence 
that the provision of non-audit services has hurt audit quality.  On the 
contrary, it concluded that in numerous instances non-audit services 
contributed to a more effective audit.
     
        Most dangerous for the accounting profession is the likely prospect that
the proposed rule would set a precedent for other regulators.  Even 
accounting firms that do not audit SEC registrants could be impacted by 
these new rules.  The proposed SEC rule would be viewed as the new model by 
state boards of accountancy, as well as federal (e.g., banking and ERISA) 
and other regulators.  These new proposed SEC rules could influence the 
regulatory approach to auditor independence outside the United States as 
well.
     
     
        In a rush to regulate, the SEC has:
        Adopted a schedule designed to avoid Congressional oversight and
preclude
meaningful public participation.
     
        Waited until the eleventh hour of the Clinton Administration to push
through a radical rule to restructure the accounting profession, without 
permitting informed oversight, or policy participation, by Congress or the 
new Administration.  In each of the last 10 annual reports to Congress, the 
SEC has not mentioned any concerns about the scope of services issue.
     
        Limited to 75 days the period for commenting on a far-reaching and
highly
complex proposal, including responding to more than 400 questions, 
collecting and analyzing a great deal of data and considering alternative 
concepts for regulating auditor independence.
     
        Pre-empted the work of the ISB, set up three years ago at the initiative
of
the SEC to develop a new conceptual framework for auditor independence and 
appropriate implementing standards.
     
        Not allowed time for important recent reforms to work, including new
disclosure and audit committee requirements adopted by the ISB, the NYSE, 
the NASD, the American Stock Exchange and the SEC.
     
     
        The SEC lacks authority for its sweeping scope of services rule.  The
statutory provisions cited by the SEC in the proposed rule pertain to public 
companies' filing of financial statements that have been audited by 
independent accountants and do not expressly authorize the SEC to make rules 
governing or regulating directly the accounting profession itself.  The 
proposed rule is based primarily, if not entirely, on alleged concerns 
relating to the "appearance of independence" - but not independence in fact. 
The SEC does not have statutory authority to impose restrictions because of 
possible perceptions about independence
     
     
Sincerely,
Romeo Chicco, CPA