To: File No. S7-49-02
From: Office of Commissioner Glassman
Date: January 7, 2003
RE: Meeting with representatives of Ernst & Young on January 6, 2003 on Proposed Auditor Independence Rules, Title II of the Sarbanes-Oxley Act of 2002

Attendees from Ernst & Young ("E&Y"): Mark Weinberg, Edmond Kolson, and Tom Riesenberg

The above listed representatives of E&Y met with Commissioner Cynthia A. Glassman to discuss the Commission's proposed rule on Auditor Independence. Their discussion points were commensurate to their written comments submitted to the Commission on January 6, 2002. They were generally supportive of the rule and its intention of restoring investor confidence. They raised objections to portions of three aspects of the rule: namely, tax services, partner rotation and legal services. As for tax services, E&Y, pointed a particular paragraph in the Commission's proposing release, which attempted to give audit committees a working example on approving certain tax services provided by a company's auditors. E&Y believes that the paragraph is the basis for tremendous confusion in the industry and requested clarifying language. E&Y states that although the Sarbanes-Oxley Act ("Act") does not attempt to limit tax services in any manner, this paragraph appears to diminish all capacities for auditing firms to engage in any tax services for audit clients.

As for partner rotation, E&Y supports the 5-year rotation of partners, however, they are concerned that the Commission's proposal to rotate more partners than are designated in the Act is over burdensome and may go too far. They propose a tiered approach as noted in their comment letter. Finally, in addressing legal services, E&Y expressed concern on the unintended consequences this requirement may place on foreign jurisdictions.