Date:    09/16/2000  9:02 AM

Subject: Reference file No:  S7-13-00

The Honorable Arthur Levitt 
Chairman    
Securities and Exchange Commission 
450 Fifth Street, N.W. 
Washington, D.C. 20549-0609 
     
RE: File #: S7-13-00 
     
Dear Chairman Levitt: 
     
On behalf of the Pennsylvania Institute of Certified Public Accountants (PICPA),
representing more than 19,000 CPAs, I am voicing our strong opposition to the 
SEC's Revision of the Commission's Auditor Independence Requirements.  We are 
concerned with the process, the proposal's breadth, and the lack of empirical 
evidence to support the SEC's conclusions.
     
THE PROCESS 
     
* The decision to move forward with the rule prohibiting non-audit services is 
not based on any facts or evidence. 
     
The last 10 annual reports to Congress do not express any concerns about the 
scope of services issue. 
     
It pre-empted the work of the Independence Standards Board to develop a 
conceptual framework for auditor independence and appropiate implementing 
standards.  This board was established three years ago in response to a SEC 
initiative.
     
* The timeline for adopting the rules appears to be designed to avoid 
Congressional oversight and preclude meaningful public participation.
     
Because it is a far-reaching and highly complex proposal, limiting the comment 
period to 75 days is not sufficient. 
     
* The SEC lacks the authority for its sweeping scope of services rule.  The 
statutory provisions that you cite pertain to public companies' filing of 
financial statements that have been audited by independent accountants and do 
not expressly authorize the SEC to make rules governing or directly regulating 
the accounting profession.
     
THE PROPOSAL'S BREADTH 
     
* The proposal addresses seven complex and far-reaching areas: 1) financial 
relationships; 2) employment relationships; 3) business relationships; 4) scope 
of services; 5) contingent fees; 6) quality control standards; and 7) proxy 
disclosure requirements for public companies.
     
Because of the breadth of the scope of services proposal there could be many 
unintended negative results such as: 
     
-accounting firms that do not audit SEC registrants could be impacted by this 
rule; 
-it would ban acting as an advocate for an audit client, or providing expert 
services in administrative proceedings, thus (except in preparing returns) 
potentially prohibit CPAs from representing audit clients before the IRS; 
     
-broad restrictions on non-audit services will likely have a 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; and
     
-there will be a negative effect on recruiting and retention of the best talent.
     
     
LACK OF EMPIRICAL EVIDENCE 
     
* The SEC ignored the conclusion of the Public Oversight Board's Panel on Audit 
Effectiveness, when it reported that "...both the profession and the quality of 
audits are fundamentally sound."  The Panel said it could find no evidence that 
providing non-audit services reduced audit quality.  On the contrary, it 
concluded that, in numerous instances, non-audit services contributed to more 
effective audits.
     
* The new disclosure and audit committee requirements that were adopted by the 
Independence Standards Board, the New York Stock Exchange, National Association 
of Securities Dealers, the American Stock Exchange and the SEC need to be in 
force for a sufficient period of time to determine their effectiveness.
     
We believe the proposed rule to restrict the services offered by accounting 
firms will result in unforeseen negative consequences.  The SEC's proposal will 
force accounting firms to review the services they provide clients and may force
some firms to discontinue auditing practices.  For example, when the AICPA 
implemented a peer review program of firms' accounting and auditing practices, a
substantial number of firms discontinued or reduced the level of attest services
offered to clients.  There could be a substantial disruption in the financial 
arena should this happen.  Moreover, reduced competition would also result in 
higher audit fees and could cause more accounting firms to merge and 
consolidate.
     
The PICPA urges you to reconsider this unsound proposal.  We recommend that the 
SEC not move forward until it has hard, empirical evidence for making these 
recommendations and can better evaluate the impact on the accounting profession,
the businesses relying on these services, and the economy in general.
     
Sincerely yours, 
     
     
     
Mark C. West, CPA
     
Owner
     
September 16, 2000