Author:  "Norman R. Pendell"
Date:    09/18/2000  6:33 PM

Subject: S7-13-00

I am writing to formally document my protest to the proposed SEC rule 
prohibiting the performance of non-audit services by a CPA firm to its audit 
clients.  My firm serves several smaller SEC registrants who both desire and 
require our assistance if they are to comply with the rather complicated SEC 
reporting rules.  If this proposed rule is imposed, it will effectively 
eliminate our ability to provide these much needed services.  This not only 
negatively impacts our clients, but also the SEC and the investing public!
     
It would be next to financially impossible for smaller SEC registrants to 
bifurcate their CPA relationship into two (or more) parts.  They have typically 
relied heavily on their outside CPA to assist them in all facets of reporting 
compliance.  If this option is taken away, the obvious result is inefficiency 
which costs the enterprise more dollars.  It is certainly likely only "Big 5" 
firms will be willing to do any SEC work which limits not only choices to 
registrants, but also gives the "Big 5" an opportunity to mandate how SEC 
reporting is to be done in the future.  Additionally, it leaves open, due to 
lack of competition, the distinct possibility for unreasonable pricing for audit
services provided to smaller registrants, especially when there is no 
opportunity for the auditing CPA firm to do additional value added services.
     
It is my understanding even the SEC admits there is no empirical evidence 
indicating independence is impaired when the auditing CPA firm performs 
additional consulting type services.  The SEC relies on CPAs to heavily consider
empirical evidence, yet does not consider such evidence itself!  There is no 
reasonable basis for the SEC to ignore the Panel on Audit Effectiveness of the 
Public Oversight Board which concluded this type of rule was unnecessary.  In 
fact, I encourage the SEC to consider it might impair CPA independence as more 
and more of some firms revenue would be based solely on auditing fees.
     
It seems this rule would very likely cause a fundamental change in the way a 
previously efficient accounting industry will need to operate.  Regional 
alliances have led to higher quality services being provided to smaller 
registrants.  It seems this rule would eliminate the ability of affiliated firms
to work together on SEC businesses.  In a business which already is undergoing 
difficulty in recruiting and retaining qualified talent due to most states 
having a "150 hour" rule, this proposal would be seen as a negative to the best 
and brightest and likely motivate them not to enter the profession due to its 
limiting characteristics.
     
In conclusion, this proposed rule is bad for businesses, their CPAs, the SEC, 
and the investing public.  It should be withdrawn.