September 19, 2000

Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609

Re: File No. S7-13-00

Proposed Rule Governing Auditor Independence

Dear Mr. Secretary:

CPA Associates International, Inc. is an international association of independent CPA and chartered accounting firms with 43 member firms in the United States and 50 member firms in 42 countries around the world. On behalf of our member firms, particularly those in the United States, we are writing to you to express our grave concern with the proposal of the Securities and Exchange Commission on auditor independence that would have a catastrophic impact on our practices, our clients and prospective clients, and the public accounting profession.

We understand the SEC decided to move forward with these proposed rules prohibiting non-audit services without adequate facts and empirical evidence that non-audit services have compromised audit quality or auditor independence, or ever caused an audit failure. In fact, the Panel on Audit Effectiveness of the Public Oversight Board that was formed at the request of the SEC concluded that both the profession and the quality of audits are fundamentally sound and found 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.

Our firms employ non-audit experts and the SEC proposal would discourage them from joining our practices. These professionals provide consultative services in complex areas such as information technology, valuations, financial planning and employee benefits. As the businesses and systems of our clients continue to become complex, we need this expertise to help us perform the highest quality audits.

Most dangerous for our firms is the likely prospect that the proposed rule would set a precedent for other regulators. Many of our firms do not audit SEC registrants and 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 and other regulators. In addition, these new proposed rules could influence the regulatory approach to auditor independence outside the United States.

The proposed ban on non-audit services is an unnecessary and unjustified measure that will restrict the ability of many, many companies to exercise free choice in a market economy in selecting their auditors and outside consultants. It will also create a fundamental restructuring of a profession that has successfully given investors reliable, independent data for the past century. We recognize there are independence problems that the SEC is rightfully addressing, but urge the adoption of an alternative solution, such as more active Audit Committees or more disclosure, as a compromise course of action.

Sincerely,

CPA Associates International, Inc.
Meadows Office Complex
301 Route 17 North
Rutherford, NJ 07070
Phone: 201-804-8686
Fax: 201-804-9222
E-mail: homeoffice@cpaai.com