Date:    09/18/2000  12:22 PM

Subject: File No. S71300, Auditor Independence

My name is Donald S. Hawley, and I am a CPA in Raleigh, North Carolina.  My 
CPA Association faxed me a fact sheet on this topic stating that they believe 
this proposed change has far reaching negative implications.  I am a small 
one man operation, and I sometimes wonder why the fear, and why the concern 
about the income stream of the large CPA firms in this country.  I wonder if 
this proposed change will have any real effect.  
     
Honesty, morale values, and integrity cannot be written into the laws 
governing the conduct of auditors.  You have to enforce the current laws, not 
try to make new ones that will only result in bigger games being played down 
the road.  Auditors are being viewed as the first line defense against all 
kinds of corporate/management (crimes)/irregularities.  Why the effort to 
change the law, instead of enforcing the laws we have and catching the 
offenders, if any.  
     
What do you think will happen if you are successful in changing the rules 
governing auditor independence?  Well, in my opinion, a couple of things 
could happen, which are negative, but possible.  First of all, audit fees 
will go up.  Why, fewer providers of auditing services due to less revenue 
generating opportunities due to the limitations in place to protect 
independence.  Many middle size firms will get out of the audit field.  Which 
means more for the bigger firms, and higher demand of services from fewer 
suppliers?  You would have increased demand and driven up cost.  What a 
wonderful thing if you are the supplier.  Next, I am afraid that the non 
audit management services that would be provided for the open market would be 
under the control of a small group of accountants.  How would you control 
referrals?  (Example:  "Big 14 CPA, Inc." will do all the audits on the North 
Side and "Big 12 CPA, Inc." will do all the audits on the South Side.  "Big 
14 CPA, Inc." will refer all the various non-audit services to the "Big 12 
CPA, Inc." and "Big 12 CPA, Inc." will do the same for "Big 14 CPA, Inc.") 
Has anything changed?  I know, you are going to tell me that you will catch 
those guys and stop them from cutting deals behind closed doors.
     
Your intent is noble, but the results would push the big players into a more 
compromising position.  Your objective would not be met, in my opinion, the 
potential for causing what you are trying to prevent would be higher.  
     
Sometimes, doing the right thing cannot be written into the rule book.  Look 
for ways to enforce the laws you have, and try to keep it simple.
     
Again, I am a one man small operation, I am a child wondering around in the 
woods when it comes to this stuff.  So, discard this if you wish.  I am only 
expressing my opinion.  Thank God for America, a country where any person can 
turn on a computer and express their opinion.
     
God Bless You
     
     
     
Don