Date:    08/14/2000  6:14 PM

Subject: Reference File No. S7-13-00

     
> ATTN: Jonathan G. Katz, Secretary
> Dear Mr. Katz: 
> I am writing to express my thoughts about the proposal from the SEC for 
> additional regulations of the CPA profession. In summary, the proposed 
> regulations go to far. In fact, the SEC has stated that they have no
> evidence that the problems they cite actually exist. They do not point out 
> a concern that these problems will exist. The extra regulations are not
> needed. 
> I am a CPA but no longer in public practice. The CPA license allows the 
> CPA to do only one thing that nobody else can do and that is to perform 
> audits, reviews and compilations of financial statements and issue their
> opinions on those statements. This is an essential function since audited 
> financial statements have credibility that non-audited statements lack. In 
> fact, they have been required from public companies for nearly 70 years.
> Without audited financial statements, our capital markets would not be as 
> well developed as they are and we would be a far less affluent and
> advanced country and world. 
> But, CPAs also have the business and financial training, skills,
> experience, ability, interest and integrity to do a lot more than audit
> client statements. CPAs give valuable business and tax advice in the forms 
> of: 
> (1) Formal consulting, 
> (2) Tax preparation, 
> (3) Representing clients before the IRS. 
> One major part of the SEC proposal would be to eliminate both formal
> consulting and representing clients before the IRS as functions a CPA can 
> perform. Now, if CPAs are prohibited from performing these functions
> several things will happen: 
> (1) The CPA profession will suffer. It will become less interesting and 
> lucrative. High caliber young people will shun the field. 
> (2) Once the CPA profession suffers, the quality of audits will suffer and 
> the reliability of audited financial statements will decline. 
> (3) As audited financial statements lose their value, the capital markets 
> will be hurt. As the information available to the markets becomes less
> reliable, market volatility will rise and capital growth (including future 
> tax surpluses and affluence in general) will slow. 
> (4) Companies will split their audits, consulting and tax work among
> different providers. None of the providers will have as much information 
> about the client as today's CPA does. 
> (5) Companies will receive lower quality audit, consulting and tax work 
> and will not be as effective and efficient as they could be. 
> (6) Companies will pay more for audits, consulting and tax work. 
> (7) Items (5) and (6) will combine to limit future profitably and growth 
> as well as result in higher costs meaning more inflation. 
> And, the SEC has no evidence of any positive effects resulting from their 
> regulations that would outweigh any of the above negatives. 
> Accordingly, I ask that  the proposed new regulations of the CPA 
> profession in Reference File S7-13-00 not be implemented. 
> Sincerely yours, 
> Paul N. Mendelsohn 
> 19 Tuxedo Drive 
> Livingston NJ 07039 

>