Mark A. McCollum
Senior Vice President
and Chief Financial Officer

Tel 847 482-5181
Fax 847 482-5180

September 25, 2000

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

Re: File S7-13-00; Revision of the Commission's Auditor Independence Requirements

Dear Mr. Katz:

Tenneco Automotive Inc. appreciates the opportunity to offer our comments on the Commission's Release, Revision of the Commission's Auditor Independence Requirements. Tenneco Automotive Inc. is a supplier of automotive ride control and emissions control products for the original equipment market and aftermarket.

We support the Commission's efforts to ensure that the investing public maintains confidence in the integrity of the financial statements of publicly traded companies. A basic premise of the Release is that auditors are "primarily responsible for the integrity of the large volume of financial information that forms the cornerstone of our full disclosure system". We as the management of Tenneco strongly believe that the primary responsibility for the integrity of our financial information belongs to us. We rely on our auditors to verify the integrity of our financial statements, but we do not see them as primarily responsible for that integrity. The high profile financial misstatements of recent years were first and foremost a failure of the management of those companies. The audit failures associated with those misstatements are secondary events, not primary contributors. To that end, we disagree with the premise of the Release that changes in independence requirements will necessarily drive public confidence in financial statements of publicly traded companies. Strong management controls coupled with good corporate governance are the primary requirements for this confidence. Recent advances in audit committee oversight responsibilities should help maintain this confidence.

That being said, we agree that some aspects of the independence requirements require updating to take into account the changes in the global marketplace since the last update of those requirements in 1983. In particular, the adjustment of the definition of financial relationships that would be deemed to impair an auditor's independence is appropriate. Where we disagree with the Commission's proposal, however, is in aspects of the prohibition of non-audit services.

Fifteen years ago, Tenneco had wide ranging interests in energy, farm and construction equipment, shipbuilding, minerals, chemicals, agriculture, life insurance, packaging, and of course, automotive parts. We have disposed of those disparate businesses, acquired automotive-related businesses, and restructured the information systems and controls of our automotive business during the last decade and a half. At various points during this evolution, we have relied upon the assistance of a small group of professional service firms to advise us and help us execute the complex series of transactions it took to complete such a significant change. We generally used the same firms each time because those firms understood our businesses, our goals, and our management. That type of understanding is valuable to us from our audit firm, too, when we need to seek assistance from them in areas where they have expertise. During this time period, our outside audit firm has assisted with internal control recommendations, advice on accounting for complex transactions, due diligence on potential acquisition targets, and general business observations. We believe that having available an independent third party with an intimate knowledge of our business that could give us viewpoints differing from our own has been beneficial to us. Moreover, we believe the knowledge our audit firm gained during these transactions has helped them provide a better quality audit. While not all of the services that our audit firm has provided would be prohibited by the Release, the ones that would be prohibited would detract from the benefits we have received and from the quality of the audit.

Last year, we also made a decision to "outsource" many of our internal audit department activities to our audit firm. Following the final transaction that left us operating only automotive-related businesses, we simply did not have the size or the management time to devote to operating a complete audit department in-house. Our previous audit department had been effective, but the administrative time involved in maintaining that department was excessive. Keeping a full staff and managing their schedules and travel assignments diverted a significant amount of the audit director's attention from the primary goal of auditing. By outsourcing, we have freed our audit director to devote her time to determining the scope of our internal audit activities and evaluating the procedures performed. She is able to focus on the control environment and the results of the audits. We believe the results of our audits benefit from this management focus. We also benefit from access to process experts. The comparatively smaller size of our company, combined with its global reach, make it cost-prohibitive for us to hire, train, and retain the process and technical experts (particularly those with the requisite language skills) that we need to operate an effective global audit department. Our arrangement with our outside audit firm gives us access to those experts in a very cost-effective manner. Finally, we believe that the external audit is now much better coordinated with the internal audit plan and that the overall results of this integrated audit are much more efficient and effective. This integrated audit approach provides our audit firm the ability to effectively expand the scope of their external audit by participating in executing the internal audit plan. We believe this enhances the quality of the audit. As a result, both our investors and we benefit. It would be difficult to achieve these audit integration synergies if we were required to outsource internal audit to another professional services firm.

These examples are intended to demonstrate anecdotally our belief that utilizing outside audit firms in advisory capacities provides significant benefits to companies and their investors that would be lost under the Release. We believe that decisions regarding engaging outside auditors for other services should ultimately rest with the audit committee and management of a company guided by principles defining what constitutes independence, rather than a broad prohibition against services. The Independence Standards Board should be allowed to develop these guiding principles.

We support the requirement in the release to disclose the services that the outside audit firm is engaged to perform. We believe that this requirement should give the necessary focus to the relationship that exists between the auditor and client to allow a reasonable person to judge that the auditor's independence is not impaired.

I would be happy to answer any questions you may have regarding our positions. I can be reached at 847 482 5181.


Mark A. McCollum