Commercial Federal Bank

January 13, 2003

Mr. Jonathan G. Katz, Secretary
U.S. Securities and Exchange Commission
450 Fifth Street, NW
Washington, D.C. 20549-0609

Dear Mr. Katz,

Commercial Federal Corporation (CFC) welcomes the opportunity to comment on the proposed rules to implement certain sections under Title II - Auditor Independence of the Sarbanes-Oxley Act.

Commercial Federal Corporation's primary subsidiary is Commercial Federal Bank (CFB). CFB is a $13 billion federal savings bank, headquartered in Omaha, Nebraska, and regulated by the Office of Thrift Supervision. CFB operates 188 branches across seven states, including Arizona, Colorado, Iowa, Kansas, Missouri, Nebraska, and Oklahoma. CFC's stock (ticker: CFB) has been actively traded on the NYSE since August 1995.

CFC strongly supports the SEC's efforts to enhance investor confidence in corporate America through the rule-making process. We greatly appreciate the opportunity to share our perspective on certain of the "Request for Comment" questions and other matters posed in the proposed rules (release no. 33-8154; 34-45934; 35-27610; IC-25838; IA-2088; FR-64, File No. S7-49-02).

Tax Services

We strongly believe the delivery of certain tax services is a natural and related extension of the audit and accounting services provided by accounting firms. Therefore, we support the specific statement in this section indicating that "Nothing in these proposed rules is intended to prohibit an accounting firm from providing tax services to its audit clients when those services have been pre-approved by the client's audit committee."

The proposal queries, "Would expansion of the proxy disclosure of professional fees paid to the independent auditor from three categories to four provide more useful information to investors?"

We support this change. This information would be appropriately reflective of the codification of prohibited services (removal of the "financial information technology consulting fees" category) and more informative to the investing public (addition of the "tax fees" category). These changes will also provide more transparent information for the investing public on the scope and nature of services provided by its accounting firm (creation of both the "tax fees" and "audit-related fees" categories).

Partner Rotation

The questions posed included: "Is the five-year `time out' period necessary or appropriate? Would some shorter time period be sufficient, such as two, three or four years? Should there be different `time out' periods based on a partner's role in the audit process?"

A rotation for the lead and concurring partners seems appropriate, and is basically consistent with existing large public accounting firm practice. This will, however, pose a timing challenge for the public accounting industry, as it must attempt to prevent the rotation of both partners from directly coinciding. Such a concurring event will result in potentially significant service disruptions compounded by the impact of learning curves for the "incoming" key individuals.

However, we do believe that a full five-year `time out' period is unnecessarily excessive. If a partner newly rotated on to the engagement were to identify possible "overlooked" issues, such issues would most likely surface in the first one or two years of a rotation. To better balance service with the intent of enhanced objectivity and independence of the firm as a whole, as gained through rotation, we would be more supportive of a shorter `time out' period (such as two years).

We also believe that extending the rotational requirements to individuals beyond the lead and concurring partners to be problematic and difficult to execute. We suggest that the extension of a rotational requirement to personnel other than the lead and concurring partners be solely at the discretion of a company's board or audit committee. Since the audit committee would need to be independent and would have full responsibility for the "appointment, compensation, retention and oversight" of the work (per other pending rules from Sarbanes-Oxley Act Section 301), the committee would best understand the full extent of such services delivered to the company. Therefore, the audit committee would be in the best position to determine if the rotational requirements should go further than the lead and concurring partners and would be in a position to make that decision fully independent of company management.

Also, "The proposed rules would not require all partners on the audit engagement team to rotate at the same time. Should it? Why or why not?"

As suggested above, we believe there is a balance between supporting an atmosphere that attempts to preserve objectivity and independence, yet also provides cost-effective service quality. We strongly believe it would not be in the best interests of the companies served, as well as the investing public, to require that all applicable engagement team partners rotate at the same time. As long as the spirit of rotation and independence is achieved, we believe the dynamics of the individual personnel rotational patterns should be worked out between the company, its auditors and its audit committee.

Definition of Audit Committee

Although the requests for comment do not address this issue, we find the definition of an audit committee under Section 205 of Sarbanes-Oxley to be extremely and unnecessarily limiting. An audit committee has a much broader mandate in any public company than the definition outlined in the Act. Specifically, the definition states that an audit committee is:

"A committee (or equivalent body) established by and amongst the board of directors of an issuer for the purpose of overseeing the accounting and financial reporting processes of the issuer and audits of the financial statements of the issuer."

The financial oversight role is a very important aspect of the duties and responsibilities an audit committee must discharge and are consistent with the focus of Sarbanes-Oxley. However, most audit committees also concern themselves with internal controls over the operations of the entire company. The audit committee helps set the "tone at the top" of an organization over its entire system of internal control, to not only address financial reporting, but also operations and compliance as outlined in the Committee of Sponsoring Organization's (COSO) definition of internal control. (COSO has become the most broadly accepted definition of internal control in the United States.) We believe that the Commission should revisit this definition and consider a broader mandate for the audit committee. Alternatively, we suggest that this definition indicate these specific financial oversight duties are mandated, but are among many other potential duties and responsibilities that may be assigned by a board to its audit committee.

Communication with Audit Committees

The request for commentary in this sections poses, "In light of the requirements for the CEO and CFO to certify information in the company's periodic filings, should the auditor be required to communicate information on critical accounting policies and practices and alternative accounting treatments to management as well as to the audit committee?"

The CEO and CFO rely not only on internal controls in place over financial reporting, but also on the assurances and representations made by the auditors. Normal interactions between a company and its auditors should result in very isolated and unusual circumstances where the auditors feel compelled to communicate information to the audit committee without prior communication to the senior management of the company. Since the auditors' assurances and representations would include information on critical accounting policies and practices, as well as alternative accounting treatments (and this information could be deemed material to the ability to achieve comfort in executing the required certifications), we agree that these communications to management should be a normal part of the required activities.

Timing of Communications

"Should these communications regarding critical accounting policies be required to be in writing? If so, why?" Also, "Should these communications regarding alternative accounting treatments be required in writing? If so, why?"

Although there should always be discussion first regarding both critical accounting policies and potential alternative accounting treatments, the conclusions reached should be documented in writing. Without such formalization, differences in recollection of the discussions and conclusions may result. Since the opinions of the auditors are formative and critical in the development of their overall conclusion on the fairness of the financials, formal documentation of these communications would demonstrate and, in turn, memorialize the appropriate level of diligence in this regard by the auditors, management and the audit committee.

Thank you for the opportunity to comment. If you have any questions or would like to discuss the comments provided above, I can be reached by telephone at (402) 554-9235 or by e-mail at


Hal A. Garyn
First Vice President - Director of Audit, Compliance & Security
Commercial Federal Bank