November 23, 1999
Mr. Jonathan G. Katz
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: File No. S7-22-99
Dear Mr. Katz:
We submit this letter in response to the request of the Commission for comments on Release No. 34-41987 relating to Audit Committee Disclosure. We agree with many of the proposals contained in the Release and currently voluntarily comply with them. We support your efforts to strengthen the role of the corporate Audit Committee. However, we feel strongly that some of the proposals will actually result in decreasing the effectiveness of Audit Committees and the quality of the members serving on those Committees.
Specifically concerning is the proposed additional requirement contained in paragraph (a)(4) of the proposed Rule 306 that the Audit Committee provides a report in the company's proxy statement. On top of management's representations and the outside auditors opinion, we see no additional value added by including this disclosure, only additional liability. We take our responsibilities seriously and ask the tough questions you refer to in the Release. We believe that we diligently perform the oversight role of an Audit Committee. It is, however, in the end, management's responsibility to fairly present the Company's financial statements and the external auditor's responsibility to opine on those financial statements.
Although we understand that you believe that the disclosure requirements will not result in increased exposure to liability, we do not share your optimism. If the new disclosure rules are approved we expect that many current Audit Committee members will resign from their positions and that recruiting strong qualified replacements will be very difficult. Clearly this result will undermine your efforts to improve the effectiveness of Audit Committees.
While we agree with the recommendations on independence, committee size, qualifications, adopting a charter and want to see them adopted, we strongly disagree with the new disclosure requirements and respectfully ask that you remove them from your final regulations.
Cisco Systems, Inc. Audit Committee
/s/ Steve West /s/ Carol Bartz /s/ Mary Cirillo
President & CEO Chairman & CEO Managing Director
Entera, Inc. AutoDesk, Inc. Deutsche Bank