Author:  "Kirby Kennedy"
Date:    09/01/2000  10:28 AM

Subject: File # S7-13-00

Dear sirs:
I oppose a number of the points in the proposed rule listed above. With 
regard to the 10 enumerated categories of non-audit services that are 
prohibited to a pulic company's auditors - I offer my following comments. 
1) Bookeeping: I agree that this impairs independence.
2) Information systems design: I do not agree that this function carries a 
substantial enough likelihood of the risk of impairment to auditor 
independence to justify an outright ban on this function. I believe that 
this is probably an unconstitutional taking of auditors' right to work 
without there being any reasonably demonstrable governmental interest that 
can be shown to be furthered by this ban. The causal connection between the 
provision of systems design and impairing independence is just not evident 
without the SEC being able to provide significant probative empiracle data 
to support this position. This is a classic area that would depend on 
professional judgement not an administrative fiat. As is often the case 
with professional matters, no hard and fast rule should apply to situations 
that must be analyzed on a case by case basis.
3) Valuation services: I do not agree with a blanket ban on these services 
being placed on outside auditors. Again this is an area where professional 
judgement must apply - not an administrative fiat. I wish to further point 
out that this is an area of overreaching by the SEC just as in 2) above. In 
areas that are best left to professional judgement, there are still avenues 
of redress for improper judgements, those avenues are called courts. I 
suggest that this appears to be an attempt to legislate with a broom when a 
paintbrush is required. Admittedly, valuation services related to certain 
functions might potentially impair independence. I do not believe that 
valuation related to tax practice would necessarily impair independence of 
the outside auditor.
4) Actuarial services: Having worked in the financial department of a large 
insurance company for several years, I agree.
5) Internal audit outsourcing: Again an outright ban is not justified. I 
have worked in companies that used their internal audit departments as a 
true part of the internal control structure. In these companies, 
outsourcing would be a delegation of management responsibilities and 
clearly a violation of auditor independence principles. However, another 
employer used the internal audit function almost exclusively to reduce the 
outside audit firm's workload thoughout the year and to prepare drafts of 
the income tax returns. These functions could reasonably be outsourced. The 
outright ban is too general.
6) Management functions: This is obviously correct to ban.
7) Human resources: I do not believe that an outright ban is justified. 
There does not appear to be a sufficient connection between most human 
resource functions and financial statement assertations to ban outside 
auditor involvement. The SEC's justification for this ban is so convoluted 
as to make Kennedy murder conspiracy theories appear to be scientific 
treatises.
8) Broker dealer, etc.: I agree that there is too great a connection 
between financial rewards in these functions and the work of the outside 
auditor.
9) Legal services: Same song - new verse. This is overbroad. For example, 
performinmg a portion of the work on drafting the percentage rent terms in 
a standard lease would not appear to impair indepence unless you apply the 
same logical jumps required to play "six steps to Kevin Bacon". A 
traditional area of auditor involvement has been income tax preparation and 
representation. In the vast majority of cases, this has not lead to 
independence related audit breakdowns. Some legal services should not be 
undertaken by outside auditors such as litigation or litigation support 
services. This is another example of a case by case anlysis being required 
which calls for professional judgement. Bad judgements should be redressed 
by courts, not an overly broad administrative rule with costs that are 
justified by uncertain results. 
10) Expert services: I disagree with this ban for the same reasons as 
discussed in the section 9) discussion. I believe that the provision of 
many expert services are even less questionable than providing limited 
legal services.
     
The disclosure requirements for nonattest services provides some 
information that might be useful to a limited number of investors, but I 
doubt that many will ever use it since we appear to moving to a society of 
day traders.
     
The affiliate language is overbroad and unduly burdensome. The trend 
towards globalization will lead U.S. based audit firms into competition 
with international groups that have combined with other professions. 
Adopting this type of extensive affiliate based restriction will lead U.S. 
auditors out of step with the rest of the world. Do we realy want to create 
the audit equivalent of the current mess involving metric versus english 
measurements?
     
My gut reaction to these proposals is that it is a hastily drafted, 
overreaching attempt by SEC staff associates to pass legislation that has 
not been carefully considered with meaningful input from those who actually 
work out in the real world.
     
A brief synopsis of my backgroung is: I am a CPA with 20 years experience, 
the most recnt 12 years have been worked in industry. I hold a graduate 
management degree and am completing work on a Juris Doctor. Hopefully, the 
content of this communication along with this backgroung information will 
lead you to at least read until the end of this missive.
     
Please reconsider these proposals and remember that you govern at the 
acquisence of those governed not through any devine right.
     
Thak you very much for any consideration that you give to my comments.