Author:  Mary_Doucet@firstclass1.csubak.edu (Mary Doucet) 
Date:    09/25/2000  5:41 PM

Subject: S7-13-00

My comments regarding the SEC’s proposed rule amendments 
regarding auditor
independence (S7-13-00) will be brief and will only address a few areas 
where I have
concerns or there are issues I think should be considered.  In my opinion 
a critical
factor in assessing the proposed rule changes (and one that the SEC has 
fully
considered) is whether these changes will strengthen the appearance of 
independence
as well as bolster independence in fact.  The profession is fortunate that 
the investing
public still believes in the integrity of the financial statement audit at 
a time when it
often appears that, at least to some accountants, the audit is just 
another commodity to
get a foothold so that other services can be ‘sold’ to the 
client.  Regardless of the
validity of the statement that the audit is a loss-leader (I am sure many 
in the profession
would disagree) the fact that there is a perception that this is the case 
cheapens the
integrity of the audit.  Without the appearance of independence, the 
investing public
will not trust the audit.  It appears that these rule changes will enhance 
independence
in fact and in appearance.
     
I fully support the SEC’s efforts to clarify under what 
circumstances an accountant
would be considered not independent and do believe that reasonable 
investors would
agree with the four criteria set forth in proposed 210.2-01(b).  I also 
commend the SEC
for re-evaluating the requirements for family and employment relationships 
and, in
essence, relaxing the restrictions while maintaining both independence in 
fact and in
appearance.
     
I believe the proposed rule changes are better for the investing public, 
the companies
being audited, and the accounting profession than the alternatives 
considered.  (1)  I
do not believe that a complete break between audit and non-audit services 
would be
good for the investing public or the companies being audited.  There are 
many services
that auditors provide because of information obtained during the audit 
which would not
impair the auditor’s independence and which the investing public 
would not reasonably
believe to impair independence.  Additionally, tax services provided to an 
audit client 
should not be a concern to the investing public.  In fact there may be a 
synergy in
providing the tax services to an audit client.  I have heard anecdotal 
evidence that tax
professionals sometimes bring issues which have an impact on the audit to 
the
auditor’s attention.  (2) I do not believe that 
‘firewalls’ in public accounting firms, no
matter how good, would ease the public’s concern about the 
appearance of lacking
independence.  (3) While the relative fees proposal (non-audit fees 
compared to audit
fees) is appealing and could possibly work, I still believe that some 
non-audit services
should not be provided by a company’s auditor.  The proposed rule 
changes would
cover these services.  Maybe there are other non-audit services for which 
one could
apply the relative fees concept.
     
I support all of the restrictions on specific non-audit services.  The 
following are
additional comments relating to specific non-audit services: 
Proposed rule 2-01(c)(4)(i)(B). Designing or implementing financial 
information systems
certainly would impair the audit firms’ independence because the 
audit firm has a stake
in a positive assessment of that system.  Also, if the auditor is acting 
in more than an
advisory position when it comes to the audit client’s internal 
accounting and risk
management control systems, the audit firm’s independence would be 
impaired.  I am
not sure where one draws the line here.
Proposed rule 2-01(c)(4)(i)(E).  I do not believe the audit firm can be 
independent if it
also provides the internal audit function regardless of what the AICPA 
rule says. 
Maybe independent audit projects or operational audits would be 
acceptable, but not
providing the outsourced internal audit function for the client.
     
While many in the accounting profession see these proposed changes as being 
detrimental to the profession, I honestly believe that once the dust has 
settled the
public will be better protected and the accounting profession will be 
strengthened.