Certified Public Accountants
P.O. BOX 1520
(217) 425-4800 FAX: 425-8866

From: Thomas W. Hill

Chairman Arthur Levitt, Commissioners Paul R. Casey,
Isaac C. Hunt, Jr. and Laura S. Unger
Secretary Jonathan G. Katz

Date: 9/22/00 4:00 p.m.

Subject: Reference file no. S7-13-00

Ladies and Gentlemen:

I am writing this letter in response to the proposed regulation that a certified public accounting firm performing audits for SEC registrants might be prohibited from providing any audit clients with most non-audit services.

Although I do not audit any publicly held companies, I believe I must respond to the ramifications that this regulation might one day have on small CPA firms. I am somewhat disturbed that SEC believes this is necessary to improve the independence and quality reports of publicly held companies. If there are independence and quality issues in reporting of any company, the SEC should investigate those accounting firms and report them to their State Boards of professional regulation and to the American Institute of Certified Public Accountants. I find this proposed regulation an attempt to fix a complicated problem with an easy answer.

I don't believe the SEC will improve the quality of the reports it receives by forcing accounting firms to provide only audit services to those clients. Here is why. First, if some auditors are not providing high quality, independent reports to the SEC regarding publicly held companies, forcing those auditors to only provide audit services will make the situation worse. The audit service has over the years become a more competitive and nonprofitable part of most CPA firms. In order to make the audit more efficient and effective, CPAs have learned to provide other non-audit services. In my firm, all of our services are performed with independence and objectivity. By providing those services for audit clients, we learn more about their business and details of operations, thus enhancing the audit process. Further, by providing these services to audit clients, we can focus on areas that add value to management and operations. If quality and independence are ongoing issues that the SEC has with an accounting firm, the SEC should address the CPA firm individually. Punishing the whole profession will not solve the problem. I believe that if this regulation is approved, audits of publicly held companies will become more costly and thus force already poor auditors into cutting more corners to make a profit. Currently, managers in large CPA firms are under a great deal of pressure. This regulation would only make an already difficult situation worse.

If this regulation would ever become applicable to all audits, I believe the results would be catastrophic to small CPA firms. If other regulators or state boards of accountancy would model after the SEC, the impact to small firms and their clients would be devastating. Not only would small firms lose profitable clients, the clients themselves would lose a longtime, knowledgeable, trusted professional.

Please reconsider the effects of this proposed regulation.

Very respectfully yours,

Thomas W. Hill, C.P.A., C.V.A.