Author:  James Backus
Date:    8/13/98 1:07 PM
     

Subject: S7-16-98 Comments on Proposed Rule
     
     
Commissioners:
     
The AICPA has brought to my attention your proposed amendment to Rule 102(e) 
clarifying the professional responsibilities of accountants.
     
While I support the AICPA's comments generally, I am most gravely concerned 
with laws and regulations that provide government and quasi-government 
entities  extensive opportunities for selective enforcement.  They can 
become a basis for harassment by politicians, regulators, and attorneys in 
ways not contemplated when they were formulated.
     
In today's litigious environment, hindsight is often the only basis for 
determining whether an error of judgment occurred.  To make accountants 
liable to third parties for simple negligence, rather than just gross 
negligence, surely will subject accountants to a much broader scope of 
litigation.  The long-term consequences of such regulation will be to 
increase audit fees, to increase the need for professional liability 
insurance and the premiums for it, and to drive qualified persons to 
alternative occupations.  None of these appear justifiable responses to the 
frustration of the court in in Checkosky decision.  I believe the court's 
frustration would be better served by advocating clearer and simpler 
legislation.
     
I believe that if a similar standard of conduct were applied to SEC staff 
and commissioners, with similar financial risks, you would raise similar 
objections.  I would support your position.
     
Please reconsider your changes.