Date:    09/21/2000  8:36 AM

Subject: File No. S7-13-00
   
     
     
Perry M. Schroeder, CPA
     
    
     
September 21, 2000
     
Laura S. Unger, Commissioner
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549-0609
     
     
Dear Ms. Unger:
     
As a member of one of the leading international associations of accounting 
firms - Accountants Global Network International - I am writing you to let 
you know how strongly I oppose the SEC's proposed federal regulation 
governing auditor independence.
     
If the rule is approved as currently proposed, accounting firms performing 
audits for SEC registrants, and perhaps even non-public clients, might 
ultimately be prohibited from providing any audit clients with most 
non-audit services.  This cascading effect would affect firms of all sizes, 
and the services we provide to hundreds of thousands of our clients.
     
Not only does this proposal sharply limit the services that accounting firms 
could perform for their audit clients, it takes a broad-brush approach to 
"affiliates".  The prohibition on non-audit services applies both to 
affiliates of the clients and the affiliates of the accounting firm.  Here, 
the rule proposal openly admits that it has adopted a "broader" definition 
of affiliate than is used in other areas of the securities law.  Accounting 
firm affiliates include "any joint venture, partnership, or other 
undertaking: with "any form of shared benefits, including...revenue, income, 
or equity appreciation," and any entities in which the accounting firm has 
an equity interest, or loans funds to, or shares funds with, or has a direct 
business relationship with.  Furthermore, the proposed definition includes 
all entities with which the accounting firm cross-sells services, or shares 
co-management, or is "publicly associated by co-branding".  In effect, the 
SEC will interpret our membership in AGN International as if we were a 
multi-national conglomerate.  One AGN member's consulting job for a 
potential audit client's subsidiary in Massachusetts (or, for that matter, 
Milan) could preclude another AGN member's attempt to land the audit 
engagement in Missouri.
     
While the entire profession would be severely negatively impacted by the 
service limitations imposed on us by the proposed rule, our firm is even 
more exposed by this broad re-definition of affiliates.  Our association 
membership has been extremely valuable to us because we have the benefit of 
sharing information with other firms around the US and the world with 
similar practice characteristics to ours, yet we maintain our independence.
     
     
There are many other reasons why this proposed rule makes no sense, among 
them:
     
1)      No empirical evidence that non-audit services have compromised audit 
quality or auditor independence;
2)      The SEC proposal would restrict public companies' freedom of choice 
when seeking outside professional services;
3)      In the midst of a huge shortage of good people in the profession, 
the rule, if adopted, will further diminish the enthusiasm of potential 
audit professionals for the profession.  None will want to be at a firm 
where 25% to 40% of the market is "off limits", and the same is true for the 
best non-audit professionals;
4)      Broad restrictions on non-audit services will likely have the 
perverse effect of undermining auditor independence by making audit firms 
overly or exclusively dependent on audit fees, which would certainly be 
contrary to the public interest.
     
In summary, the SEC's proposal to restrict the services offered by 
accounting firms represents a fundamental restructuring of a profession that 
has successfully given investors the reliable, independent data they need 
for the past century.  A decision by a government agency to tell some 
business organizations what services they may offer and to tell other 
businesses from whom they may buy services is an extraordinary economic 
intervention without any empirical or other basis.  There's no question that 
most Americans would find this a curious public policy position for their 
government to take.
     
This rule must not be allowed to go forward.  Please do all in your power to 
represent the best interests of the American people and protect our 
profession from this disastrous legislation.
     
     
Sincerely,
BADEN, GAGE & SCHROEDER, LLC
     
     
     
Perry M. Schroeder, CPA