From: Pat Jewison [JEWISONP@novachem.com]
Sent: Tuesday, December 17, 2002 8:32 AM
To: 'rule-comments@sec.gov'
Subject: Proposed Auditor Independence Rules- File No. S7-49-02


> Mr. Jonathan G. Katz	
> Secretary
> Securities and Exchange Commission	
> 450 Fifth Street, N.W.
> Washington, DC 20549-0609
> 
> Re: Proposed Auditor Independence Rules - File No. S7-49-02
> 
> Dear Mr. Katz:
> 
> NOVA Chemicals Corporation ('NOVA Chemicals") wishes to comment on
> proposals made by the Securities and Exchange Commission ("SEC") regarding
> the limitation of certain tax services that auditors can provide to their
> clients.
> 
> NOVA Chemicals is an SEC registrant and is committed to following a high
> standard of corporate governance and supports initiatives to improve
> auditor independence. Effective January 1, 2001, the only services our
> auditors provide to us, other than audit and audit related services,
> relate to tax matters. Previously, our auditors had provided consulting
> and internal audit services.  These services were discontinued to help
> ensure auditor independence.
> 
> We continue to retain our auditors for tax compliance and tax planning
> purposes as we believe they are in a unique position to provide us
> valuable services at a reasonable cost.  Because of their expert level of
> knowledge in the tax area and the fact they must review our tax provision
> as part of the financial statement audit, they are able to provide
> insightful tax advice based on a sound understanding of our business.  We
> value this service and would like to continue using our auditors for tax
> services.      
> 
> In the discussion of its proposed rules, the SEC states that the
> formulation of tax strategies (e.g. tax shelters) designed to minimize a
> company's tax obligations is an example of a tax service that would impair
> an auditor's independence. We disagree.
> 
> The rational given by the SEC is that this service may require the
> auditors to audit their own work, to become an advocate for the client's
> position on novel tax issues, or to assume a management function.
> 
> We agree that, in certain situations,  auditors could be put in positions
> of auditing certain tax strategies that they had proposed. In these cases,
> there could be some bias on the part of the auditor to be more supportive
> of the accounting treatment, than they would be, had they not proposed the
> strategy.  However, we believe this potential bias can be mitigated.  At
> NOVA Chemicals we have implemented a policy whereby all major tax driven
> initiatives require review by two third parties. This review by a second
> advisor helps ensure that inappropriate transactions are not undertaken .
> The audit committee must approve any tax consulting work provided by our
> external auditors.  We welcome suggestions from our auditors on tax
> related matters the same way we do on internal control matters.  We do not
> believe that having our auditors provide advice on tax or internal control
> matters would result in them auditing their own work. 
> 
> We do not believe that providing tax planning advice results in the
> auditor becoming an advocate for our position. They do not represent us in
> any judicial or regulatory proceedings.  We also do not think that
> providing this advice causes them to assume a management function.  They
> can provide suggestions, but ultimately it is management's decision as to
> what course of action to take.
> 
> We suggest the SEC allow audit committees to decide whether or not the
> auditor's independence would be compromised if the auditors were allowed
> to provide tax services, on a case by case basis.   The audit committee
> can take into account the particular circumstances of the situation before
> they pre-approve the services.  We believe the value created by allowing
> these services to be provided is greater than any value created through a
> possible increase in perceived auditor independence.
> 
> Thank you for allowing us to comment on these proposals.
> 
> Sincerely,
> 
> NOVA Chemicals Corporation
> Patrick D. Jewison
> Vice President and Controller