Comments on Proposed Rule:
Auditor Independence Requirements

Release Nos. 33-7870; 34-42994; 35-27193; IC-24549; IA-1884; File No. S7-13-00

Author:  "William Aldrich"  at Internet
Date:    09/11/2000  9:32 AM
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Hello,
     
After reading the Motley Fool's article on the need for independence between 
the auditing branch and consulting branch of auditing firms, I believe that 
the two branches should be separate.  Apparently, many in the accounting 
profession think that, too.  Just today I read in the Wall Street Journal 
that Hewlett-Packard will try to buy the consulting branch of Price 
Waterhouse.
     
Yours,
Bill Aldrich
     

Author:  "Bock; Jason J."  at Internet
Date:    09/11/2000  8:51 AM
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        I fully support a rule that would increase the independence of
auditors.  As and individual investor, I rely on the financial auditors of 
public companies to do their jobs to the best of their abilities so I can 
have accurate information to base investment decisions on.  I  count on 
these auditors to take an independent and detailed look at a companies books 
because I don't have the expertise or the access to do this myself.  The big 
accounting firms argue that their is no conflict of interest but I disagree. 
Even the appearance of a conflict of interest is harmful.  One of the 
cornerstones of our market system is the faith that the numbers put out by 
public companies are accurate and have been verified.  If this is put into 
doubt because of a conflict of interest (or an appearance of one) then the 
whole system loses validity and the risk of investing increases for 
everyone.  Thank you for your time.
     
Jason Bock
Bock110@cs.com
Westlake, Ohio

Author:  "Ronald Butler"  at Internet
Date:    09/11/2000  8:21 AM
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Subject: File No. S7-13-00  Auditor Independence
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Speaking as an investor, the separation of professional audits from 
consulting services is absolutely critical.  Please keep up your efforts 
to create an auditor that investors can trust and keep them independent 
from services firms.  It is obvious to me that the accounting profession 
will not clean up it's own act and it will take SEC intervention to make 
this happen.
     
Thank you for your continued efforts in this matter..

Author:   at Internet
Date:    09/11/2000  10:23 AM
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I am writing to comment on the SEC's proposal to require the separation of 
auditing and consulting services of auditing firms.  I support all measures 
necessary to secure the independence and reliability of financial audits. 
Audited financials provide the cornerstone information on which the 
efficiency and accuracy of market prices for publicly traded stocks depend. 
As an individual investor, I lack the resources to independently verify such 
information -- I am dependent on the SEC and market safeguards for that 
task.  Anything that calls into question the reliability of those safeguards 
-- such as an independent profit motive on the part of the auditors -- puts 
the market, and my investments, at risk.  Please proceed with regulations to 
secure the independence of auditors. 
Thank you for the opportunity to comment, 
Marinn Carlson 
     
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Author:  "Mike Cochrane"  at Internet
Date:    09/11/2000  12:18 AM
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To whom it may concern,
     
As an individual investor I find it unacceptable for auditing and consulting to 
come from the same firm.  It is an enormous conflict of interest and I find it 
amazing that it has gone on for so long.  Please put an end to it.
     
Thanks,
     
Mike Cochrane
     

Author:   at Internet
Date:    09/11/2000  12:25 PM
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As an individual investor I would like to register my strong support for 
rules/regulations to enforce the separation of accounting (audit) and 
consulting services by the same company. Its simply common sense that the 
potential conflict of interest is so great that it should not be allowed. 
- Christopher J. Crowder
     

Author:  "Marcie Harding"  at Internet
Date:    09/11/2000  8:30 AM
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When the profession of accounting is turned into the more-lucrative business of 
consulting, the independence of the audit is suspect. 
     
Cross-marketing is the real danger. These outside services must be divorced from
the audit.
      
Marcie Harding
Phone: 812 476-6662, Ext. 214
FAX:  812 469-4163
Email: marcie@pinncomp.com
     

Author:  "Heller; Charles"  at Internet
Date:    09/11/2000  9:01 AM
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Auditor Independence
     
I fully support your above initiative and I thought I would just drop you a note
to let you know.  Consulting fees being so important to auditors it is difficult
to keep the auditors independent.  Good luck!
     
Charles Heller

Author:  "Hove; Paul E (C)(STP)"  at Internet
Date:    09/11/2000  7:39 AM
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The Wall Street Journal newspaper reported previously confidential details 
of the probe on Friday. It said that from 1991 to 1997, Arthur Andersen 
received from Waste Management about $50 million in fees for consulting 
services and $10 million for auditing services.
Is this what we can expect from SEC who we depend on to protect us from 
stock manipulation by organized criminals. Who is paying off the watchdogs! 
Get your act together or face the voters. This will soon be a issue that 
will be decided in congress and not necessarily favorable to your 
organization.

Author:  "Robert Hrnicek"  at Internet
Date:    09/11/2000  9:22 AM
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To whom it may concern,
     
As an individual investor, I wanted to voice my support of keeping auditing 
businesses separate from consulting (or any other type of business). Thank 
you.
     
Regards,
     
Robert L. Hrnicek
     

Author:  "Richard Jenkins"  at Internet
Date:    09/11/2000  8:50 AM
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Sirs,
     
I would like to comment issue of consulting services and independent 
auditing.
     
The role of auditor within the profession of accounting is in essence a 
position of public trust.  When the financial statements of a publicly 
traded company are annotated with a statement of an independent auditor, 
investors have the right to expect that the auditor IS in fact independent. 
Small investors, in particular, do not have the resources to verify the 
informatio contained in financial statements.  They must rely on the 
accuracy of these documents and the integrity of the auditors independence.
     
For the auditing entity to derive a substantial portion of its income (often 
far greater than the fees generated by auditing)from the firms that it is 
auditing in a non-auditing function certainly raises the spector of a 
conflict of interest.  While there may be no publicly available evidence of 
compromised audits, the lack thereof does not prove that there are no 
compromised audits.
     
I spent many years serving in the military.  As a leader of junior soldiers, 
I had an obligation to treat all of them equally and fairly.  It was made 
quite clear, on multiple occasions, that not only would favoritism not be 
tolerated, but that the mere appearance of favoritism was cause for action. 
If I found myself in a situation where a soldier might reasonably feel that 
I was treating another soldier preferentially, I was bound to take steps to 
eliminate and/or correct the situation.
     
In my opinion, the same standard needs to be applied to the position of 
independent auditor.  While there may never have been an audit whose 
integrity was compromised by the fact that the auditor was also a 
consultant, the mere possiblity or appearance of such compromise justifies 
taking steps to elimate the possibility or appearance.  If this is not the 
case, how is the investor to have faith in the independent auditors' 
statements?
      
Best Regards,
     
Richard J. Jenkins
2334 Wavetree Lane NW
Acworth, GA  30101
     

Author:  JAN JOHNSON  at Internet
Date:    09/11/2000  7:44 AM
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I DEFINITELY SEE A PROBLEM WITH AN AUDITING FIRM ALSO DOING CONSULTING 
FOR THE COMPANY IT AUDITS.  PEOPLE ARE BASICALLY HONEST; HOWEVER, 
CONFLICT OF INTEREST IS AN ISSUE AND SOME PEOPLE ARE NOT AS HONEST AS 
OTHERS.  WHAT CAN WE - THE INDIVIDUAL INVESTOR - DO TO HELP YOU DIVIDE 
THIS POTENTIALLY DANGEROUS SITUATION?
JAN JOHNSON

Author:   at Internet
Date:    09/11/2000  9:56 AM
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Date: September 11, 2000
     
Re: File No. S7-13-00
     
To the SEC: 
     
As a small independent investor in individual stocks and mutual funds, I urge 
the SEC to establish rules and regulations that would require auditors to be 
independent and totally divorced from more lucrative consulting services 
being offered to their clients.
     
I am a 52-year-old divorced woman dependent on my modest portfolio to support 
what I hope will be a long and healthy retirement. I must trust in the 
integrity and objectivity of oversight auditors to give clean and accurate 
bills of financial health to the companies in which I invest, or in which the 
managers of my mutual funds invest.
     
I am concerned that during this historic bull market, safeguards of the 
public interest are being chipped away in the names of increased profits and 
market opportunities. The private financial community becomes stronger as its 
profits grow and, like the companies that support lobbyists to chip away at 
environmental protection legislation in the name of competition and profit, I 
believe large audit and consulting firms will continue to use their economic 
and subsequent political power during this, their heyday, to expand their 
profit-making opportunities at the expense of rigorous oversight intended to 
protect shareholders in client companies.
     
The following excerpts from Chairman Levitt's speech at NYU were 
thought-provoking to me. As one who has spent the last year learning how to 
invest, it is especially important to me that during my due diligence 
research of companies worthy of investing my modest and hard-earned savings 
in, I can trust in the objectivity and total independence of the auditors 
charged with fiscal oversight of those companies. 
     
From half a century of observing human nature, it is painfully clear to me 
that it is the subtle grey areas in which otherwise honest men and women make 
decisions that may seem inconsequential and harmless in themselves, but taken 
together create a clear erosion in the boundaries that separate public from 
private interests. Where private interests gain too much economic and 
political power they tend to protect and expand themselves, while public 
interests tend to suffer or, at best, be overlooked. 
     
With more and more small investors taking advantage of low-cost trading 
vehicles and teaching themselves how to research and invest in individual 
companies, it is more important than ever for the federal government to do 
what it can to ensure that profitable and savvy audit firms do not lose sight 
of their first and ultimate raison d'etre: to provide investors with 
accurate, objective, timely, independent and trustworthy analysis of the 
fiscal condition of companies. To do less than that destroys the very reason 
for their existence.
     
I urge the SEC to establish rules and regulations that will ensure the 
independence of oversight auditors from any influence or subtle persuasion 
that may be inherent in their parent companies' efforts to expand their 
services and/or markets to the clients they serve.
     
Thank you for this opportunity to address the Commission.
     
Janice Lesniak Babcock
11 Rackliffe Street
Gloucester, MA 01930
Tel: 978-281-4232 or 617-359-6645
E-mail: 
     
From NYU speech, Center for Law and Business, 5/10/00, by Arthur Levitt:
     
As the firms expand their product lines, consulting and other services may 
shorten the distance between the auditor and management. Independence - if 
not in fact, then certainly in appearance - becomes a more elusive 
proposition. When an audit firm performs valuations of numbers that appear in 
its client's financials, the mandate for independence is threatened. When an 
audit firm performs the internal audit function its client would otherwise 
do, the ethic of independence is tarnished. When an audit firm also keeps its 
clients books, the principle of independence is undermined. And when some 
firms take on tax and other assignments where the size of the fee is based on 
the answer given, one has to wonder how such a practice is consistent with a 
culture that has long prided itself on objectivity. 
     
Not surprisingly, product line expansion has been an outgrowth of market 
forces. And the audit is sometimes priced lower to attract clients willing to 
pay for higher margin consulting services. But, the audit foothold as a 
distribution channel is at the very root of the inherent tension that these 
interdependent relationships foster. The audit engagement partner, upon whose 
shoulders much of the credibility of the profession rests, makes decisions 
each day that affect the underlying quality of the audit. These often 
unrecognized guardians of our capital markets exercise the judgment that 
validates the integrity of the financial information. 
More than a hundred years ago, it was said, "A public accountant acknowledges 
no master but the public." But, when auditors engage in extensive services for 
an audit client truly unrelated to the audit, they must now also serve another 
master - management. In this dual role, the auditor, who guards the integrity 
of the numbers, now both oversees and answers to management. 
     
     
Assuming the role of "relationship" manager, the auditor helps develop and 
coordinate extensive cross-selling and marketing strategies with, for 
example, his firm's information technology consulting group. And while it may 
never be quite so explicit, some auditors know, and others suspect, that 
their compensation is influenced by how well they "manage" that relationship 
in its entirety. As the firms' business objectives drive them into broader 
alliances, it's becoming more difficult to ascertain where one relationship 
ends and another begins.
     
If a firm is auditing a major computer company or a global financial services 
firm, it needs to have the necessary technological or financial skills. And, 
as technology becomes increasingly important to business and to the future of 
the profession, firms need to be able to develop and maintain these essential 
skills. When this broader skill set is being used to further the audit, 
that's good business and good for investors. But if those skills are used 
purely to build databases, structure employment payment plans, or devise 
financial strategies, I'm concerned that the audit function is simply being 
used as a springboard to more lucrative consulting services - instead of 
augmenting the firm's core focus. 
Some argue that offering consulting services to audit clients facilitates the 
recruitment of talented professionals. But if these same services can be 
offered to other clients, isn't this more an argument for the synergies of a 
business model based on cross-selling services? In any event, a more 
competitive recruiting environment is not sufficient justification to awaken 
the specter of compromise or to jeopardize the integrity of audits. 
     
It is not the bright line of right and wrong that the lack of auditor 
independence often implicates as much as it is that grey area where the 
answers aren't so clear; where the temptation to "see it the way your client 
does" is subtle, yet real. 
Independence is, in many respects, a condition of the mind of the auditor, 
its reflection the trust and confidence of the public
     
Should there be more appropriate limits on the types of services that an 
audit firm can render to a public company client? How should audit firms be 
structured to assure independence? What are the consequences, if any, of 
public ownership? Should firms be permitted to affiliate with entities who 
provide services to the firms' audit clients that the firms themselves would 
not be allowed to provide? 
     
But, even before the SEC considers ways to safeguard independence, I appeal 
to corporate America's audit committees to pay close attention to the types 
of services their auditors are performing and to question whether it would be 
more in their investors' interests to have some of those services performed 
by someone else. 

Author:   at Internet
Date:    09/11/2000  8:43 AM
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I wholeheartedly support the "Auditor Independence" rules.  Combining the 
auditing and nonauditing services create a conflict of interest and is not 
in the interest of the shareholders.
     
                                                        Dinesh Shah

Author:  Diane Taylor  at Internet
Date:    09/11/2000  12:10 PM
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Dear SEC,
     
For some time I have wondered how reliable the audits of companies 
are...  Based on the audit of the institute for which I work (granted it's 
a nonprofit and not in the US), which I find rather superficial, I wonder 
about audits of major and not-so-major corporations.  Our auditor is, by 
the way, Atag Ernst and Young, one of the major firms in the field.  An 
additional question arises when the firms that provide the audit also 
provide consulting services.  It would seem that this is a conflict of 
interest.
     
I hope that the SEC takes these matters into consideration (thorough audit, 
auditors not otherwise connected to business with a company) when it 
changes regulations in the future.
     
Sincerely yours,
Diane Taylor
(have Keogh and IRA accounts with Charles Schwab)
     

Author:  "Robert E. Thigpen"  at Internet
Date:    09/11/2000  9:33 AM
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Gentlemen:
     
Please add this response to your public comment regarding S7-13-00.
     

Author:  "Trentham; Allen (CAP; TIPE)"  at Internet
Date:    09/11/2000  12:51 PM
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Separation of the consulting houses and the auditing houses simply makes 
good sense from an independent investor standpoint.  Having dealt with 
numerous consulting companies over my career, I don't feel comfortable 
dealing with groups that also audit our books, simply because I'm usually 
showing them my "dirty linens" when I know that our auditors would/should 
know about the same.  GE has not been an issue, but other companies I've 
worked for/with have been reluctant to have the same consulting houses audit 
them...and vice-versa.  
     
The argument that there is no evidence of impropriety is not valid since 
there have bee numerous cases that were quickly settled, then sealed so that 
no evidence would be around....