Date: 09/05/2000 4:40 PM Subject: File No. S7-13-00 ACXIOM P.O. Box 2000 1 Information Way Little Rock, AR 72203-2000 (501) 342-1000 VIA FEDERAL EXPRESS/EMAIL Mr. Jonathan G. Katz, Secretary Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549-0609 August 28, 2000 Dear Mr. Katz, Please accept this letter as our Company's response to the Securities and Exchange Commission's most recent proposed regulations on Auditor's Independence (File No. S7-13-00). We are writing this letter to express our concerns about the proposed rule to restrict the services that can be provided by accounting firms. We believe that confidence in the financial reporting process of public companies is essential to the credibility of our equity markets. While we echo your beliefs that the independence of auditors is of utmost importance to investors, company management and audit committees, we do not believe that the Commission's proposed rulemaking adequately addresses this concern nor considers all of the potential negative economic consequences. Although our interests and the interests of the Commission are consistent on the issue of auditor independence, we believe that the proposed rule will have several negative consequences as outlined below. We believe these consequences would undermine the effectiveness of audits as well as increase the cost of doing business. Specifically, we are concerned about the portion of the proposal that would regulate the scope of services to be provided by accounting firms. During the past few months, our Company and its audit committee made a change in its auditors. The change of auditors was primarily driven by the fact that our predecessor auditors had elected to close their local office. Being that our company is not headquartered in a large metropolitan city, our remaining choice of local professional service providers was somewhat limited. Fortunately, we were able to find a national firm with a local presence and with the appropriate skill set to meet our needs. The firm that was selected was chosen based upon their professional reputation, their credentials and our prior experience with them. However, had this proposed rulemaking been effective, our Company would have to have settled for its second or third choice. By placing these proposed restrictions on public entities, the Commission will effectively limit the ability of many companies from selecting the most knowledgeable, experienced and efficient service providers. These limitations would unfairly prevent companies from making the best decision on behalf of its shareholders and would place public companies at a disadvantage to their non-public competitors. Additionally, these limitations could potentially have the impact of reducing competition and increasing audit costs. Certain work that was formerly done by the audit firm (areas such as tax, valuations, and compensation, for example) would now have to be transitioned to other firms. However, the company's audit firm would still be required to review the work of specialists, and in many cases reperform the work, in order to rely on it. The result is a less efficient, more costly process. Also, if the proposed rule is adopted, many companies would be forced to dismiss its existing auditors who have performed well in order to obtain needed non-audit services. Based upon our recent experience, the cost associated with replacing an auditor or changing a business consultant is significant. Company resources are diverted and executive management personnel are distracted from normal business operations during the selection and transition periods. All of the aforementioned items are just a sample of the potential negative impacts that would be created if this proposed rule is adopted in its current form. Based upon our review of the proposed rule and our prior experience, we have not seen any factual evidence that would cause us to believe that auditor independence has been compromised due to the provision of non-audit services. To the contrary, we believe that our existing audit firm has a better understanding of our business and internal control processes due to the fact that they have historically supplemented our internal audit process. Our beliefs are consistent with those of Phil Livingston, president of the Financial Executive Institute. Mr. Livingston recently stated in a news release related to the proposed rule that, "Companies prefer to have all options open to them, to have freedom of choice in selecting consultants. Many times the audit firm has the best knowledge and understanding of the business and can provide certain consulting services more efficiently and economically than competing firms." We also believe that the safeguards are in place to assure auditor independence and that these safeguards are getting better and better. Specifically, our audit committee and our auditors have implemented increased discussions and disclosure as a result of the recent regulations and report issued by the Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees. We agree with the Blue Ribbon Committee's findings and strongly support the new regulations. Already, we have seen positive benefits from the adoption of these regulations as our Audit Committee is more thoroughly involved in oversight activities that have enhanced and, we believe, will continue to enhance the quality of financial reporting and the monitoring of auditor independence. We confirm our support of the majority of the Panel on Audit Effectiveness which stated that, "any notions that audit committees have not made or cannot make reasoned judgements about independence matters is unfairly impugning the abilities and integrity of these committees." It is our belief that our Audit Committee possesses the necessary skills to make informed decisions about the services it receives from its auditing firm and others. We support the new disclosure requirements recently adopted by the Commission, the Independence Standards Board and the stock exchanges to assist audit committees in monitoring audit independence. We believe that this approach empowers the audit committee and corporate officers to select, approve and supervise audit firms as well as other service providers. We believe the results of these new disclosure requirements should be monitored and analyzed prior to the adoption of the Commission's proposed regulation. Additionally, we strongly believe that adequate disclosure, accountability and improved oversight can help achieve the same objective of the Commission's proposed regulation. This can be accomplished without limiting choices, reducing competition and adding unnecessary costs. Accordingly, we urge the Commission to withdraw the proposed regulation and establish a more reasonable approval process and approach to addressing auditor's independence with respect to the regulation of scope of services which may be provided by accounting firms. Respectfully submitted, /s/ Caroline Rook Caroline Rook Financial Operations Leader Acxiom Corporation cc: Rodger Kline Catherine L. Hughes