Comments on Proposed Rule:
Revision of the Commission's Auditor
Independence Requirements
[Release Nos. 33-7870; 34-42994; 35-27193; IC-24549; IA-1884; File No. S7-13-00]
Author: at Internet
Date: 09/25/2000 10:06 PM
Normal
TO: RULE-COMMENTS at 03SEC
Subject: Agreement With Chairman Leavitt's Desire for More Auditor In
------------------------------- Message Contents
I cannot stress enough how strongly I agree with chairman Leavitt's desire to
limit the conflicts of interest in accounting firms. I am a casualty actuary
and have been nothing but appalled at the tremendous willingness of many of
my brethren and others in the financial professions in general to tell the
public the story the client wants told instead of the true facts.
Interestingly, this problem exists in insurance regulation as well as
accounting firms. Any help you can provide those of us who are interested in
accurate accounting would be appreciated. FYI I am a well-published
actuarial author whose work is studied by actuarial students so I do speak
with some authority on this matter. I am switching from compuserve (cs.com)
to bellsouth.net and do not know my new e-mail address so I may only be
reached at 770.908.9208. In any event, keep up the good work! Some of us in
the financial professions support you!
Author: Jim Brinkman at Internet
Date: 09/25/2000 1:54 PM
Normal
TO: RULE-COMMENTS at 03SEC
Subject: Reference File No:S7-13-00
------------------------------- Message Contents
Dear SEC:
I would like to go on record as opposing the passage of the proposed
regulation limiting the scope of CPA services.
I believe that it is unnecessary ay this time to limit the services that
a CPA can provide to clients. From my reading of the subject, there is
no evidence that shows that the public is currently being harmed by the
present CPA-client arrangements. Certainly, I maintain my independence.
I don not wish to see my practice reduced in size should this rule go
into effect.
Cordially,
James Brinkman, CPA
9570 SW Barbur, Suite 312,
Portland OR 97219
Author: "Celso L. Chaparro" at Internet
Date: 09/25/2000 6:26 PM
Normal
TO: RULE-COMMENTS at 03SEC
CC: senator_hatch@hatch.senate.gov at Internet
CC: senator@bennett.senate.gov at Internet
Subject: SEC ruling
------------------------------- Message Contents
> Subject:Reference File No.: S7-13-00
>
>
> Dear Jonathan G. Katz, Secretary Securities and
> Exchange Commission:
>
> As a CPA in public practice, I wish to take
> this opportunity to offer my
> opinion regarding the proposed Securities
> Exchange Commission (SEC)
> regulation "Revision of the Commission's
> Auditor Independence Requirements;
> Proposed Rule, 65 Fed. 43, 148 (2000)," (the
> proposal). This opinion is
> offered prior to the close of the proposal
> comment period, which expires
> September 25, 2000.
>
> I firmly believe the proposal, as currently
> written, is unwarranted, not
> supported by facts, or requested by the
> financial and business community we
> both serve. Non-audit services offered by audit
> firms simply have not
> compromised auditor independence or added to
> audit failure. I offer and
> believe the following support my position
> concerning the proposal.
>
> · Audit firms have an excellent
> history, awareness and attitude of
> maintaining, observing and adhering to the
> Independence Rules. Audit firms
> are well aware of the Independence Rules in
> regard to non-audit services
> offered by audit firms. The Independence Rules
> are the first and most
> understood rules of audit firms. The
> Independence Rules for audit firms are
> the first rules within the Code of Ethics and
> the first functional area
> referenced in the Quality Control Standards as
> promulgated by the AICPA.
> There cannot be any misunderstanding concerning
> the importance of the
> Independence Rules by audit firms or the
> public.
>
> · I cannot see a problem concerning
> audit firms violating the
> Independence Rules as they relate to non-audit
> services. I am curious what
> facts and circumstances were used by the
> Commission to determine that the
> "Scope of Services" offered by audit firms has
> resulted in substandard
> engagements through financial and auditing
> standards violations, since even
> the SEC admits that there is no empirical
> evidence that non-audit services
> have compromised audit quality or auditor
> independence, or even caused an
> audit failure. None of the studies or reports
> cited by the SEC concluded
> that the scope of services impaired audit
> effectiveness, or that an
> exclusionary ban was necessary or appropriate.
> I do not believe there is
> factual support for the need for such a
> dramatic change relevant to the
> "Scope of Services" offered by audit firms.
>
> · In the last 10 annual reports to
> Congress, the SEC has not
> mentioned any concerns regarding the "Scope of
> Services" offered by audit
> firms. Where has this concern originated?
>
> · It appears to me that the SEC has
> ignored the conclusions of the
> SEC's Panel of Audit Effectiveness of the
> Public Oversight Board. This SEC
> appointed panel concluded, "both the profession
> and the quality of audits
> are fundamentally sound." The Panel did not
> find any evidence that the
> provision of non-audit services negatively
> impacted audit quality. In fact,
> quite the opposite - the Panel instead noted
> that "in numerous instances
> non-audit services contributed to a more
> effective audit."
>
> · The proposal greatly restricts the
> ability of the public to
> benefit from the knowledge possessed by audit
> firms. The financial and
> business community will be forced to undertake
> procedures which are highly
> inefficient and costly in both time and expense
> to procure needed non-audit
> services from those that simply do not have the
> knowledge and understanding
> possessed by an audit firm. Public companies'
> freedom of choice in
> selecting outside professional services will be
> restricted. The SEC will be
> forcing public companies to constantly choose
> whether to hire a firm solely
> as its auditor or solely as a provider of these
> other services, when the
> audit firm may be the best provider for both.
>
> · In that same regard, the proposal's
> broad restriction on non-audit
> services will in itself, undermine auditor
> independence by making audit
> firms too reliant and dependent on audit fees.
> This dependence by audit
> firms on audit fees would not serve the public
> interest.
>
> · Although the proposal does clearly
> state that it "would not effect
> tax-related services" provided by audit firms
> to audit clients and
> references only compliance services provided by
> audit firms to audit
> clients, it would prohibit an audit firm from
> acting as an advocate for an
> audit client, providing expert service in
> administrative proceedings, and
> logically prohibit audit firms from
> representing audit clients before the
> Internal Revenue Service.
>
> · The proposal would create a negative
> effect on the ability of
> audit firms to recruit and retain the best
> talent. Professionals would not
> be interested in or challenged to work with
> firms in which 25% - 40% of the
> current market would not open to them to
> practice. This prohibition
> concerning the ability of professionals to
> perform either audit or non-audit
> services within a firm would limit the
> attractiveness of firms. Simply put,
> the best will elect to enter a profession in
> which their ability to perform
> would not be limited.
>
> · The proposal prohibits audit firms
> from entering into almost any
> joint venture or partnership with any entity
> which may offer non-audit
> services to the audit firm's audit client. In
> addition, this proposal also
> prohibits an audit firm from participating in
> beneficial economic activities
> and business relationships. These independent,
> legal and sound relationships
> would be prohibited because the entities
> participating would be treated as
> "affiliates of the audit firm."
>
> · The proposal will place new
> independence requirements between
> audit firm members within regional alliances,
> associations and cooperative
> agreements with respect to the audit clients of
> each other.
>
> · The impact to all audit firms,
> regardless of having SEC audit
> clients or not, will be dramatic. Other
> regulators will use the proposal, if
> adopted, as a model. This "model" may be used
> by state boards of
> accountancy, other federal regulators, (i.e.,
> banking and ERISA areas of
> audit practice) and other regulators.
>
> I believe the significance of this impact
> requires the SEC to reconsider the
> timing of the proposal because:
>
> · The 75-day comment period is entirely
> too short to permit
> meaningful and timely public input. This short
> comment period does not
> permit collecting and analyzing the huge amount
> of data required, nor does
> it provide enough time to formulate meaningful
> and viable alternatives for
> regulating the "Scope of Services" offered by
> audit firms.
>
> · Three years ago the SEC set up the
> Independence Standards Board
> (ISB). I believe the work of the ISB is being
> pre-empted by this proposal.
> The ISB, as originally charged by the SEC, was
> to develop new concepts and
> framework regarding auditor independence and
> related implementation.
>
> · Recently, the ISB, NYSE, NASD,
> American Stock Exchange and the SEC
> have adopted new disclosure and audit committee
> requirements. This proposal
> and its timetable have not given enough time
> for those requirements to
> mature and work.
>
> · The proposal's timetable has been
> presented in the last days of
> the current Presidential administration. The
> lateness within this
> administration, and the limit on public input,
> will not provide opportunity
> for input from Congress and the new
> administration.
>
> In addition, I must question the authority of
> the SEC in regard to this
> "Scope of Services" rule. The authority cited
> by the SEC in the proposal
> pertains to the filing of public companies'
> financial statements that have
> been audited by independent audit firms. This
> authority does not provide for
> making rules that govern and regulate the audit
> profession itself. The
> proposed rules clearly concern the "appearance
> of independence." The
> proposal neglects to address any issues, facts
> or circumstances concerning
> the additional requirement concerning
> independence "fact." Since inception,
> the independence rules have been defined by an
> auditor's independence in
> regard to "appearance and fact." I question
> whether the SEC has statutory
> authority to impose restrictions because of
> possible "perceptions" about
> lack of independence.
>
> In as much as this proposal is a fundamental
> change to one of the most basic
> and observed rules of the audit profession, I
> urge the Commission to defer
> its adoption to afford more time for input from
> the CPA profession, public
> entities, and other interested parties.
>
> Thank you for your consideration.
>
> Sincerely,
>
> Celso L. Chaparro, Accountant
> Leverich Rasmuson Banyard
>
>
Author: "Jeffrey J. Dale" at Internet
Date: 09/25/2000 2:10 PM
Normal
TO: RULE-COMMENTS at 03SEC
CC: "Thomas M. Gilbert" at Internet
CC: Gilbert Accountancy Corporation at Internet
CC: Gilbert Accountancy Corporation at Internet
CC: "Edward E. Straine" at Internet
CC: Gilbert Accountancy Corporation at Internet
CC: "Peggy A. Vande Vooren" at Internet
CC: Gilbert Accountancy Corporation at Internet
CC: Gilbert Accountancy Corporation at Internet
CC: "Sharon A. Tobar" at Internet
CC: James Flynn at Internet
Subject: S7-13-00
------------------------------- Message Contents
As a manager in a medium-sized local public accounting firm, I feel compelled to
comment on the SEC's proposed rule governing auditor independence, labeled
S7-13-00. From the published information I have seen, I don't think the
Commission fully understands the devastating impact this proposed rule would
have on public accounting firms and the profession itself. Though only the
largest firms would be directly and immediately affected by the SEC rule, it
would be myopic to downplay the precedent this rule would set for other
regulators at all levels in this country and around the world.
The audit service has become something of a commodity. Accounting firms today
must diversify their service offerings in order to survive. The interaction
between audit and consulting is crucial in several ways:
1) Audit clients are a ready market for consulting work. Most firms, especially
small to medium sized ones, don't have the wherewithal to start a consulting
business from scratch with a client base separate from their audit client base.
If subject to the proposed rule, most accounting firms would be left with little
or no consulting business and little or no prospect of developing consulting
business. In today's market, many companies look to their auditors as business
advisors, and this rule would restrict the choices of those companies and deny
them the benefit of that expertise.
2) Consulting expertise improves the quality of a firm's audits. Understanding
of clients' businesses, the industries in which they operate, and the economy at
large are an indispensable part of a quality audit, and that understanding would
be severely compromised by the proposed rule. Accounting doesn't operate in a
vacuum, especially in today's highly competitive business environment, and an
audit practice without broad-based business knowledge and experience is an
ineffective and inefficient audit practice.
3) Consulting is a significant benefit to audit clients and a boost to a firm's
audit business. In the current market, firms have an incentive to develop
broad-based business expertise, and their success at doing so is reflected in
the fees they are able to charge. With little outside expertise to offer, there
would be little to differentiate between firms, and audits would become even
more of a commodity. Don't assume this would be a problem only for the audit
firms. With prospective clients selecting audit firms based mostly on price,
audit firm revenues would be sharply reduced, and audit quality would surely
suffer.
4) College graduates have many options in today's market, and the opportunity to
develop a variety of marketable skills outside of auditing is a significant
benefit. Public accounting firms would find it difficult to offer that kind of
opportunity under the proposed rule, and it would become even more difficult for
those firms to attract and retain qualified employees than it already is. The
loss would be felt both in the skills of audit employees and in the dearth of
non-audit employees working for public accounting firms. With less opportunity
to offer prospective employees, firms would be obliged to pay higher
compensation. In an environment of lower-skilled employees, reduced standards,
and higher compensation costs, audit quality would certainly suffer even more.
In short, a proposed rule intended to improve the quality of audits would,
ironically, have the opposite effect, and would force a devastating
restructuring of the public accounting profession. Auditor independence is
certainly an issue worthy of concern, but more consideration is needed to
develop balanced, workable solutions. The Panel on Audit Effectiveness of the
Public Oversight Board, formed at the SEC's own request, not only found no
evidence that the provision of non-audit services has hurt audit quality, but
concluded that non-audit services had the potential to improve audit quality. I
implore the SEC to heed this conclusion, and the concerns of the public
accounting profession, and reject this rule, for the good of the profession and
the public it serves.
Jeffrey J. Dale, CPA
Gilbert Accountancy Corporation
1760 Creekside Oaks Drive, Suite 190
Sacramento, CA 95833
(916) 646-6464 voice
(916) 641-2727 fax
www.GilbertCPA.com
JeffDale@GilbertCPA.com
Author: KRYSTAL Deets at Internet
Date: 09/25/2000 3:40 PM
Normal
TO: RULE-COMMENTS at 03SEC
Subject: Proposed Rule, 65 Fed. Reg, 148(2000)
------------------------------- Message Contents
September 25, 2000
Dear Sirs:
I am writing to you to express my sincere concern regarding Securities and
Exchange Commission, Revision of the Commission's Auditor Independence
Requirements; Proposed Rule, 65 Fed. Reg 43, 148(2000). I began my career
in public accounting as an employee of a worldwide professional services
firm. Today, I work for a regional firm performing audit services. It is
my belief that the proposed scope of services rule, if implemented, will
hurt not only those of us who are auditors, but it will also hurt our
clients, and ultimately, their investors.
As an auditor, I am keenly aware of the importance of independence in an
audit. I realize that public perception of my independence is critical to
the integrity of the profession and the marketability of my services.
However, I frequently encounter audit issues requiring the investment of
several days of work beyond those anticipated when the audit fee was
negotiated. Because the firm by which I am employed is able to generate
revenue in other capacities, I am able to spend the time necessary to
perform thorough audits. I believe that the proposed scope of services rule
will make audit firms overly or exclusively dependent on auditing fees. Can
such dependence on audit fees truly enhance independence from our clients?
Certainly not!
I have participated in the audits of both audit-only clients, and clients
for which our firm performs a variety of services. I have scrutinized the
books of both types of clients with the same care and attention to detail.
Even the Panel on Audit Effectiveness of the Public Oversight Board did not
find that the provision of non-audit services has hurt audit quality.
Rather, the Panel stated that in numerous instances non-audit services
actually contributed to a more effective audit. What purpose does the burden
of additional regulation serve if performance of additional services has not
been shown to damage audit results?
I mentioned that I believe the proposed regulations will hurt our clients
and their investors. Allow me to elaborate. Our firm is extremely familiar
with the needs and systems of our clients. Should our clients need
assistance selecting new software, hardware, or evaluating their methods,
might not our knowledge of their companies make us the best people to
provide assistance in these areas? Consultants providing services to their
firm's audit clients are motivated to provide the highest quality service
possible for a number of reasons, a few of which I will describe:
1. The firm desires to continue its relationship with the client once
the consulting services have been completed. A consultant engaged in a
one-time job will obviously have a reduced level of concern for the
effectiveness of services performed.
2. The firm has a high level of interest in any procedures that will
impact our clients' ability to obtain accurate and timely information
required for financial reporting. An outside consultant would be more
inclined to propose procedures or software that might increase the
efficiency of day-to-day operations, but decrease the quality of information
used for reporting purposes. Shouldn't investors have access to the highest
quality of information available?
Certainly, all audit clients are free to use the services of any
professional services firm they choose. But if they desire to enlist the
services of those who perform their audit, shouldn't they be allowed to do
so?
Finally, I am certain you are aware that any regulation imposed by the SEC
will more than likely be imitated by other regulating bodies. While large
firms and businesses might be able to withstand the impact of this proposed
regulation, its impact on smaller firms and businesses could be tremendous.
Please do not go forward with this proposed rule that would hurt
accountants, their clients, and investors alike.
Sincerely,
Krystal Deets
Staff Accountant,
Atkinson & Co., Ltd.
Author: "Kelli Dickerson" at Internet
Date: 09/25/2000 2:54 PM
Normal
TO: RULE-COMMENTS at 03SEC
CC: at Internet
CC: at Internet
Subject: Reference File No.: S7-13-00
------------------------------- Message Contents
Dear Jonathan G. Katz, Secretary Securities and Exchange Commission:
As an accountant in public practice, I wish to take this opportunity to
offer my opinion regarding the proposed Securities Exchange Commission (SEC)
regulation "Revision of the Commission's Auditor Independence Requirements;
Proposed Rule, 65 Fed. 43, 148 (2000)," (the proposal). This opinion is
offered prior to the close of the proposal comment period, which expires
September 25, 2000.
I firmly believe the proposal, as currently written, is unwarranted, not
supported by facts, or requested by the financial and business community we
both serve. Non-audit services offered by audit firms simply have not
compromised auditor independence or added to audit failure. I offer and
believe the following support my position concerning the proposal.
· Audit firms have an excellent history, awareness and attitude of
maintaining, observing and adhering to the Independence Rules. Audit firms
are well aware of the Independence Rules in regard to non-audit services
offered by audit firms. The Independence Rules are the first and most
understood rules of audit firms. The Independence Rules for audit firms are
the first rules within the Code of Ethics and the first functional area
referenced in the Quality Control Standards as promulgated by the AICPA.
There cannot be any misunderstanding concerning the importance of the
Independence Rules by audit firms or the public.
· I cannot see a problem concerning audit firms violating the Independence
Rules as they relate to non-audit services. I am curious what facts and
circumstances were used by the Commission to determine that the "Scope of
Services" offered by audit firms has resulted in substandard engagements
through financial and auditing standards violations, since even the SEC
admits that there is no empirical evidence that non-audit services have
compromised audit quality or auditor independence, or even caused an audit
failure. None of the studies or reports cited by the SEC concluded that the
scope of services impaired audit effectiveness, or that an exclusionary ban
was necessary or appropriate. I do not believe there is factual support for
the need for such a dramatic change relevant to the "Scope of Services"
offered by audit firms.
· In the last 10 annual reports to Congress, the SEC has not mentioned any
concerns regarding the "Scope of Services" offered by audit firms. Where has
this concern originated?
· It appears to me that the SEC has ignored the conclusions of the SEC's
Panel of Audit Effectiveness of the Public Oversight Board. This SEC
appointed panel concluded, "both the profession and the quality of audits
are fundamentally sound." The Panel did not find any evidence that the
provision of non-audit services negatively impacted audit quality. In fact,
quite the opposite - the Panel instead noted that "in numerous instances
non-audit services contributed to a more effective audit."
· The proposal greatly restricts the ability of the public to benefit from
the knowledge possessed by audit firms. The financial and business community
will be forced to undertake procedures which are highly inefficient and
costly in both time and expense to procure needed non-audit services from
those that simply do not have the knowledge and understanding possessed by
an audit firm. Public companies' freedom of choice in selecting outside
professional services will be restricted. The SEC will be forcing public
companies to constantly choose whether to hire a firm solely as its auditor
or solely as a provider of these other services, when the audit firm may be
the best provider for both.
· In that same regard, the proposal's broad restriction on non-audit
services will in itself, undermine auditor independence by making audit
firms too reliant and dependent on audit fees. This dependence by audit
firms on audit fees would not serve the public interest.
· Although the proposal does clearly state that it "would not effect
tax-related services" provided by audit firms to audit clients and reference
s only compliance services provided by audit firms to audit clients, it
would prohibit an audit firm from acting as an advocate for an audit client,
providing expert service in administrative proceedings, and logically
prohibit audit firms from representing audit clients before the Internal
Revenue Service.
· The proposal would create a negative effect on the ability of audit firms
to recruit and retain the best talent. Professionals would not be interested
in or challenged to work with firms in which 25% - 40% of the current market
would not open to them to practice. This prohibition concerning the ability
of professionals to perform either audit or non-audit services within a firm
would limit the attractiveness of firms. Simply put, the best will elect to
enter a profession in which their ability to perform would not be limited.
· The proposal prohibits audit firms from entering into almost any joint
venture or partnership with any entity which may offer non-audit services to
the audit firm's audit client. In addition, this proposal also prohibits an
audit firm from participating in beneficial economic activities and business
relationships. These independent, legal and sound relationships would be
prohibited because the entities participating would be treated as
"affiliates of the audit firm."
· The proposal will place new independence requirements between audit firm
members within regional alliances, associations and cooperative agreements
with respect to the audit clients of each other.
· The impact to all audit firms, regardless of having SEC audit clients or
not, will be dramatic. Other regulators will use the proposal, if adopted,
as a model. This "model" may be used by state boards of accountancy, other
federal regulators, (i.e., banking and ERISA areas of audit practice) and
other regulators.
I believe the significance of this impact requires the SEC to reconsider
the timing of the proposal because:
· The 75-day comment period is entirely too short to permit meaningful and
timely public input. This short comment period does not permit collecting
and analyzing the huge amount of data required, nor does it provide enough
time to formulate meaningful and viable alternatives for regulating the
"Scope of Services" offered by audit firms.
· Three years ago the SEC set up the Independence Standards Board (ISB). I
believe the work of the ISB is being pre-empted by this proposal. The ISB,
as originally charged by the SEC, was to develop new concepts and framework
regarding auditor independence and related implementation.
· Recently, the ISB, NYSE, NASD, American Stock Exchange and the SEC have
adopted new disclosure and audit committee requirements. This proposal and
its timetable have not given enough time for those requirements to mature
and work.
· The proposal's timetable has been presented in the last days of the
current Presidential administration. The lateness within this
administration, and the limit on public input, will not provide opportunity
for input from Congress and the new administration. In addition, I must
question the authority of the SEC in regard to this "Scope of Services"
rule. The authority cited by the SEC in the proposal pertains to the filing
of public companies' financial statements that have been audited by
independent audit firms. This authority does not provide for making rules
that govern and regulate the audit profession itself. The proposed rules
clearly concern the "appearance of independence." The proposal neglects to
address any issues, facts or circumstances concerning the additional
requirement concerning independence "fact." Since inception, the
independence rules have been defined by an auditor's independence in regard
to "appearance and fact." I question whether the SEC has statutory authority
to impose restrictions because of possible "perceptions" about lack of
independence. In as much as this proposal is a fundamental change to one of
the most basic and observed rules of the audit profession, I urge the
Commission to defer its adoption to afford more time for input from the CPA
profession, public entities, and other interested parties.
Thank you for your consideration.
Sincerely,
Kelli P. Dickerson, Accountant
Leverich Rasmuson Banyard
Author: "Alexander Gabbin" at Internet
Date: 09/25/2000 5:12 PM
Normal
TO: RULE-COMMENTS at 03SEC
Subject: Reference file no: S7-13-00
------------------------------- Message Contents
Jonathan G. Katz, Secretary
Securities and Exchange Commission
Washington, D.C. 20549-0609
Dear SEC Commissioner:
The aspect of the proposed rule change that concerns me the most is the
prohibition of accounting firms from performing non-audit services. There is
a very real possibility that, if enacted, this prohibition could have
significant adverse consequences for accounting education ( in terms of the
students who will be attracted to accounting as a major) and the accounting
profession.
Before such a proposal is enacted, I feel the evidence suggesting that a
proposal of this kind is necessary to protect the public interest should be
unequivocable. Since I am not aware that such evidence currently exists, I
support deleting this prohibition from the current proposal.
Alexander L. Gabbin
School of Accounting
James Madison University
Author: RAVEN GILMORE at Internet
Date: 09/26/2000 7:05 AM
Normal
TO: RULE-COMMENTS at 03SEC
Subject: S7-13-00
------------------------------- Message Contents
Dear Sir,
I work for a small CPA firm which provides both audit
and nonaudit services to non SEC clients.
I am against the SEC proposed rules governing auditor
independence. The CPA of today and of the future has
evolved into more than just an accountant. Today's
CPA consults on issues of human resource, management,
financial planning, in addition to providing tax and
audit services. All of these functions are
interrelated and provides a comfort level to clients
who would like an all encompassing CPA. Limiting
these nonaudit services would curtail the business
provided by the small and medium sized CPA firm and
would set a precedent on how clients view CPA's.
CPA's are held to a certain ethical standard and it
should be these standards that CPA's should be held
accountable to.
Sincerely,
Raven Gilmore
Ovist & Howard, CPA's
Henderson, Nevada 89014
Author: jeremy howard at Internet
Date: 09/25/2000 5:33 PM
Normal
TO: RULE-COMMENTS at 03SEC
Subject: S7-13-00
------------------------------- Message Contents
Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609
Dear Sir,
I am writing in reference to the proposed file no.
S7-13-00.
I strongly disagree with this proposal. By separating
a CPAs services, it not does a terrible disservice to
our clients and the business community at large.
Clients are better served through a synergy of
services for a variety of reasons. We are able to
integrate their retirement goals, personal goals,
financial goals, and tax goals together to further
achieve these goals. We are able to see the complete
picture, and therefore offer more complete service.
If CPA firms have to be broken up, confusion will
reign. Businesses will pay more for educating various
entities of their business operations. Even when the
professionals are educated, they then have to be in
constant communication with the other various
professionals, thereby decreasing efficiency and
increasing costs. The good this act would do does not
even come close to balancing the harm it will inflict.
When Sam Walton started Wal-Mart, he wanted a shopping
experience where as many shopper wants and needs were
fulfilled. Imagine going to Sam, and saying he was
not being fair to everyone by having all these
different items at a lower cost. He has to break up
and basically start up a shopping mall. We would
never do this because it goes against everything
America stands for, the free market.
Accounting and tax functions are done to record what
businesses have accomplished. Their main concern is
to do their task as timely and as efficient as
possible. The businesses try to fulfill all of their
clients needs. What is incredible is, if this act
passes, CPAs will prohibited from doing the same kind
of good business practice.
I hope that a correct decision is made, and S7-13-00
is struck down. I thank you for your time.
Jeremy Howard, CPA.
Author: "Jason Knighton" at Internet
Date: 09/25/2000 3:20 PM
Normal
TO: RULE-COMMENTS at 03SEC
CC: at Internet
CC: at Internet
Subject: SEC ruling
------------------------------- Message Contents
Dear Jonathan G. Katz, Secretary Securities and Exchange Commission:
As a CPA in public practice, I wish to take this opportunity to offer my
opinion regarding the proposed Securities Exchange Commission (SEC)
regulation "Revision of the Commission's Auditor Independence Requirements;
Proposed Rule, 65 Fed. 43, 148 (2000)," (the proposal). This opinion is
offered prior to the close of the proposal comment period, which expires
September 25, 2000.
I firmly believe the proposal, as currently written, is unwarranted, not
supported by facts, or requested by the financial and business community we
both serve. Non-audit services offered by audit firms simply have not
compromised auditor independence or added to audit failure. I offer and
believe the following support my position concerning the proposal.
· Audit firms have an excellent history, awareness and attitude of
maintaining, observing and adhering to the Independence Rules. Audit firms
are well aware of the Independence Rules in regard to non-audit services
offered by audit firms. The Independence Rules are the first and most
understood rules of audit firms. The Independence Rules for audit firms are
the first rules within the Code of Ethics and the first functional area
referenced in the Quality Control Standards as promulgated by the AICPA.
There cannot be any misunderstanding concerning the importance of the
Independence Rules by audit firms or the public.
· I cannot see a problem concerning audit firms violating the
Independence Rules as they relate to non-audit services. I am curious what
facts and circumstances were used by the Commission to determine that the
"Scope of Services" offered by audit firms has resulted in substandard
engagements through financial and auditing standards violations, since even
the SEC admits that there is no empirical evidence that non-audit services
have compromised audit quality or auditor independence, or even caused an
audit failure. None of the studies or reports cited by the SEC concluded
that the scope of services impaired audit effectiveness, or that an
exclusionary ban was necessary or appropriate. I do not believe there is
factual support for the need for such a dramatic change relevant to the
"Scope of Services" offered by audit firms.
· In the last 10 annual reports to Congress, the SEC has not
mentioned any concerns regarding the "Scope of Services" offered by audit
firms. Where has this concern originated?
· It appears to me that the SEC has ignored the conclusions of the
SEC's Panel of Audit Effectiveness of the Public Oversight Board. This SEC
appointed panel concluded, "both the profession and the quality of audits
are fundamentally sound." The Panel did not find any evidence that the
provision of non-audit services negatively impacted audit quality. In fact,
quite the opposite - the Panel instead noted that "in numerous instances
non-audit services contributed to a more effective audit."
· The proposal greatly restricts the ability of the public to
benefit from the knowledge possessed by audit firms. The financial and
business community will be forced to undertake procedures which are highly
inefficient and costly in both time and expense to procure needed non-audit
services from those that simply do not have the knowledge and understanding
possessed by an audit firm. Public companies' freedom of choice in
selecting outside professional services will be restricted. The SEC will be
forcing public companies to constantly choose whether to hire a firm solely
as its auditor or solely as a provider of these other services, when the
audit firm may be the best provider for both.
· In that same regard, the proposal's broad restriction on non-audit
services will in itself, undermine auditor independence by making audit
firms too reliant and dependent on audit fees. This dependence by audit
firms on audit fees would not serve the public interest.
· Although the proposal does clearly state that it "would not effect
tax-related services" provided by audit firms to audit clients and
references only compliance services provided by audit firms to audit
clients, it would prohibit an audit firm from acting as an advocate for an
audit client, providing expert service in administrative proceedings, and
logically prohibit audit firms from representing audit clients before the
Internal Revenue Service.
· The proposal would create a negative effect on the ability of
audit firms to recruit and retain the best talent. Professionals would not
be interested in or challenged to work with firms in which 25% - 40% of the
current market would not open to them to practice. This prohibition
concerning the ability of professionals to perform either audit or non-audit
services within a firm would limit the attractiveness of firms. Simply put,
the best will elect to enter a profession in which their ability to perform
would not be limited.
· The proposal prohibits audit firms from entering into almost any
joint venture or partnership with any entity which may offer non-audit
services to the audit firm's audit client. In addition, this proposal also
prohibits an audit firm from participating in beneficial economic activities
and business relationships. These independent, legal and sound relationships
would be prohibited because the entities participating would be treated as
"affiliates of the audit firm."
· The proposal will place new independence requirements between
audit firm members within regional alliances, associations and cooperative
agreements with respect to the audit clients of each other.
· The impact to all audit firms, regardless of having SEC audit
clients or not, will be dramatic. Other regulators will use the proposal, if
adopted, as a model. This "model" may be used by state boards of
accountancy, other federal regulators, (i.e., banking and ERISA areas of
audit practice) and other regulators.
I believe the significance of this impact requires the SEC to reconsider the
timing of the proposal because:
· The 75-day comment period is entirely too short to permit
meaningful and timely public input. This short comment period does not
permit collecting and analyzing the huge amount of data required, nor does
it provide enough time to formulate meaningful and viable alternatives for
regulating the "Scope of Services" offered by audit firms.
· Three years ago the SEC set up the Independence Standards Board
(ISB). I believe the work of the ISB is being pre-empted by this proposal.
The ISB, as originally charged by the SEC, was to develop new concepts and
framework regarding auditor independence and related implementation.
· Recently, the ISB, NYSE, NASD, American Stock Exchange and the SEC
have adopted new disclosure and audit committee requirements. This proposal
and its timetable have not given enough time for those requirements to
mature and work.
· The proposal's timetable has been presented in the last days of
the current Presidential administration. The lateness within this
administration, and the limit on public input, will not provide opportunity
for input from Congress and the new administration.
In addition, I must question the authority of the SEC in regard to this
"Scope of Services" rule. The authority cited by the SEC in the proposal
pertains to the filing of public companies' financial statements that have
been audited by independent audit firms. This authority does not provide for
making rules that govern and regulate the audit profession itself. The
proposed rules clearly concern the "appearance of independence." The
proposal neglects to address any issues, facts or circumstances concerning
the additional requirement concerning independence "fact." Since inception,
the independence rules have been defined by an auditor's independence in
regard to "appearance and fact." I question whether the SEC has statutory
authority to impose restrictions because of possible "perceptions" about
lack of independence.
In as much as this proposal is a fundamental change to one of the most basic
and observed rules of the audit profession, I urge the Commission to defer
its adoption to afford more time for input from the CPA profession, public
entities, and other interested parties.
Thank you for your consideration.
Sincerely,
Jason Knighton
Tax Specialist
Leverich Rasmuson Banyard
Author: at Internet
Date: 09/25/2000 4:13 PM
Normal
TO: RULE-COMMENTS at 03SEC
Subject: File No. S7-13-00 - (Auditor Independence)
------------------------------- Message Contents
I do believe an audit firms independence is compromised when that same firm
is contracted or ratified by a board of directors of a publicly traded
company.
I also think that beside that argument, the independence auditing firms are
supposed to maintain is compromised by continuous re-election and the
dollars billed by these firms for big fortune 500 dollars. Although
consulting fee's may generate more revenue for the auditing firm, the cost
of an audit and the revenue that it generates in something to consider.
These auditing service revenues may be smaller that consulting revenue, but
they're nothing to dismiss. There's a lot of money associated with audits.
I know companies where the external auditors are staffed right at the
company headquarters. Tell me this isn't a conflict of interest or that
independence isn't compromised!
Thanks,
WAL
Regional Controller - BDD Southwest Region
Phone: 409-866-4778, ext. 343
Fax: 409-866-8526
Author: "mlopez mlopez" at Internet
Date: 09/25/2000 6:46 PM
Normal
TO: RULE-COMMENTS at 03SEC
Subject: S7-13-00
------------------------------- Message Contents
I believe the proposed rule is longtime overdue. It will likely save
the profession and will ultimately benefit the investing community
and the population at large
mlopez@britannica.com
Author: "dportman" at Internet
Date: 09/25/2000 6:08 PM
Normal
TO: RULE-COMMENTS at 03SEC
Subject: File No. S7-13-00
------------------------------- Message Contents
September 25, 2000
Mr. Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609
Re: File No. S7-13-00
Revision of the Commission's Auditor Independence Requirements
Dear Mr. Katz:
I want to offer my support for the changes the Commission is proposing for
auditor independence. I commend you and your committee for this initiative
aimed at improving and modernizing the public accounting profession.
My years of experience have taught me that two of the most important qualities
in our profession are reliability and integrity. I have also learned that
perception is often times as important as reality. The work done by public
accountants must be both independent and perceived by investors and others in
the public arena as independent. Anything that compromises that position
should not be tolerated as our financial markets, indeed our entire business
community, rely totally on this position to function.
I reviewed the proposed rule amendments and also the hearing testimony from the
hearing held July 26, 2000. Like many of those providing testimony, I believe
auditor independence will be best achieved by curbing the proliferation of
non-audit services provided by a public accounting firm to its audit clients. I
think an outright ban on these non-audit services is the only way to guarantee
compliance. There are plenty of non-audit clients that audit firms can pursue
to provide their non-audit services. At a minimum, the proposed proxy
disclosure requirements will help the public understand the relationship an
entity has with its public accounting firm.
There are many non-audit services that could, potentially, impair independence.
Certainly any outsourcing of the internal audit function to the organization's
external auditing firm impairs independence. But we must also look deeper and
review the services that are not so obvious in their ability to impair
independence. Services such as financial information systems design and
implementation, appraisal or valuation services, actuarial services, human
resources and many management functions must also be reviewed. I have always
believed that auditors cannot function as a part of client management and remain
independent. It is human nature, especially when fees are involved.
Now is the time to strengthen and modernize our profession and the proposed SEC
rule amendments regarding auditor independence do just that. I urge you to go
forward with these needed changes including the relaxing of restrictions on
investment and employment imputed to a public accounting firm.
Thank you and all the Commissioners, I look forward to working under the new
guidelines.
David G. Portman
Cincinnati, Ohio
Author: "Tom Simmons" at Internet
Date: 09/25/2000 2:45 PM
Normal
TO: RULE-COMMENTS at 03SEC
CC: at Internet
CC: at Internet
Subject: Reference File No.: S7-13-00
------------------------------- Message Contents
Dear Jonathan G. Katz, Secretary Securities and Exchange Commission:
As a accountant in public practice, I wish to take this opportunity to offer
my
opinion regarding the proposed Securities Exchange Commission (SEC)
regulation "Revision of the Commission's Auditor Independence Requirements;
Proposed Rule, 65 Fed. 43, 148 (2000)," (the proposal). This opinion is
offered prior to the close of the proposal comment period, which expires
September 25, 2000.
I firmly believe the proposal, as currently written, is unwarranted, not
supported by facts, or requested by the financial and business community we
both serve. Non-audit services offered by audit firms simply have not
compromised auditor independence or added to audit failure. I offer and
believe the following support my position concerning the proposal.
· Audit firms have an excellent history, awareness and attitude of
maintaining, observing and adhering to the Independence Rules. Audit firms
are well aware of the Independence Rules in regard to non-audit services
offered by audit firms. The Independence Rules are the first and most
understood rules of audit firms. The Independence Rules for audit firms are
the first rules within the Code of Ethics and the first functional area
referenced in the Quality Control Standards as promulgated by the AICPA.
There cannot be any misunderstanding concerning the importance of the
Independence Rules by audit firms or the public.
· I cannot see a problem concerning audit firms violating the
Independence Rules as they relate to non-audit services. I am curious what
facts and circumstances were used by the Commission to determine that the
"Scope of Services" offered by audit firms has resulted in substandard
engagements through financial and auditing standards violations, since even
the SEC admits that there is no empirical evidence that non-audit services
have compromised audit quality or auditor independence, or even caused an
audit failure. None of the studies or reports cited by the SEC concluded
that the scope of services impaired audit effectiveness, or that an
exclusionary ban was necessary or appropriate. I do not believe there is
factual support for the need for such a dramatic change relevant to the
"Scope of Services" offered by audit firms.
· In the last 10 annual reports to Congress, the SEC has not
mentioned any concerns regarding the "Scope of Services" offered by audit
firms. Where has this concern originated?
· It appears to me that the SEC has ignored the conclusions of the
SEC's Panel of Audit Effectiveness of the Public Oversight Board. This SEC
appointed panel concluded, "both the profession and the quality of audits
are fundamentally sound." The Panel did not find any evidence that the
provision of non-audit services negatively impacted audit quality. In fact,
quite the opposite - the Panel instead noted that "in numerous instances
non-audit services contributed to a more effective audit."
· The proposal greatly restricts the ability of the public to
benefit from the knowledge possessed by audit firms. The financial and
business community will be forced to undertake procedures which are highly
inefficient and costly in both time and expense to procure needed non-audit
services from those that simply do not have the knowledge and understanding
possessed by an audit firm. Public companies' freedom of choice in
selecting outside professional services will be restricted. The SEC will be
forcing public companies to constantly choose whether to hire a firm solely
as its auditor or solely as a provider of these other services, when the
audit firm may be the best provider for both.
· In that same regard, the proposal's broad restriction on non-audit
services will in itself, undermine auditor independence by making audit
firms too reliant and dependent on audit fees. This dependence by audit
firms on audit fees would not serve the public interest.
· Although the proposal does clearly state that it "would not effect
tax-related services" provided by audit firms to audit clients and
references only compliance services provided by audit firms to audit
clients, it would prohibit an audit firm from acting as an advocate for an
audit client, providing expert service in administrative proceedings, and
logically prohibit audit firms from representing audit clients before the
Internal Revenue Service.
· The proposal would create a negative effect on the ability of
audit firms to recruit and retain the best talent. Professionals would not
be interested in or challenged to work with firms in which 25% - 40% of the
current market would not open to them to practice. This prohibition
concerning the ability of professionals to perform either audit or non-audit
services within a firm would limit the attractiveness of firms. Simply put,
the best will elect to enter a profession in which their ability to perform
would not be limited.
· The proposal prohibits audit firms from entering into almost any
joint venture or partnership with any entity which may offer non-audit
services to the audit firm's audit client. In addition, this proposal also
prohibits an audit firm from participating in beneficial economic activities
and business relationships. These independent, legal and sound relationships
would be prohibited because the entities participating would be treated as
"affiliates of the audit firm."
· The proposal will place new independence requirements between
audit firm members within regional alliances, associations and cooperative
agreements with respect to the audit clients of each other.
· The impact to all audit firms, regardless of having SEC audit
clients or not, will be dramatic. Other regulators will use the proposal, if
adopted, as a model. This "model" may be used by state boards of
accountancy, other federal regulators, (i.e., banking and ERISA areas of
audit practice) and other regulators.
I believe the significance of this impact requires the SEC to reconsider the
timing of the proposal because:
· The 75-day comment period is entirely too short to permit
meaningful and timely public input. This short comment period does not
permit collecting and analyzing the huge amount of data required, nor does
it provide enough time to formulate meaningful and viable alternatives for
regulating the "Scope of Services" offered by audit firms.
· Three years ago the SEC set up the Independence Standards Board
(ISB). I believe the work of the ISB is being pre-empted by this proposal.
The ISB, as originally charged by the SEC, was to develop new concepts and
framework regarding auditor independence and related implementation.
· Recently, the ISB, NYSE, NASD, American Stock Exchange and the SEC
have adopted new disclosure and audit committee requirements. This proposal
and its timetable have not given enough time for those requirements to
mature and work.
· The proposal's timetable has been presented in the last days of
the current Presidential administration. The lateness within this
administration, and the limit on public input, will not provide opportunity
for input from Congress and the new administration.
In addition, I must question the authority of the SEC in regard to this
"Scope of Services" rule. The authority cited by the SEC in the proposal
pertains to the filing of public companies' financial statements that have
been audited by independent audit firms. This authority does not provide for
making rules that govern and regulate the audit profession itself. The
proposed rules clearly concern the "appearance of independence." The
proposal neglects to address any issues, facts or circumstances concerning
the additional requirement concerning independence "fact." Since inception,
the independence rules have been defined by an auditor's independence in
regard to "appearance and fact." I question whether the SEC has statutory
authority to impose restrictions because of possible "perceptions" about
lack of independence.
In as much as this proposal is a fundamental change to one of the most basic
and observed rules of the audit profession, I urge the Commission to defer
its adoption to afford more time for input from the CPA profession, public
entities, and other interested parties.
Thank you for your consideration.
Sincerely,
Thomas Simmons, accountant
Leverich Rasmuson Banyard
Author: "Don Sorensen" at Internet
Date: 09/25/2000 4:06 PM
Normal
TO: RULE-COMMENTS at 03SEC
Subject: S7-13-00
------------------------------- Message Contents
Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609
Dear Mr. Katz:
I am writing to comment on the SEC's proposed rule that would limit
non-audit services provided by CPA firms to audit clients. I have over 29
years of auditing experience with public accounting firms and 3 years as a
governmental auditor.
I believe that the SEC's proposed rule is a step in the wrong direction.
One of the greatest risks that an auditor faces is a lack of understanding.
This lack of understanding can relate to the audit client's accounting
system, personnel, management intent & integrity, unique industry standards,
just to name a few. A tremendous amount of understanding can be obtained by
providing other accounting or consulting services. This understanding can,
and usually does, increase the quality of audits.
I believe that the most difficult audits that our firm has performed over
the past 25 years are those in which we only provide audit services. In
these instances we have a difficult time developing a relationship and trust
level that is essential to a quality audit.
I assume that the SEC's rationale in proposing this rule is to increse
auditor independence. However, I do not believe that an auditor gains
independence by being unaware. Most CPAs are honestly trying to do a good
job and hold the present independence standards in high regard. The
proposed rule would do nothing to improve auditor independence, it would
only make the audit function more difficult.
Please reconsider the proposed rule.
Sincerely,
Don L. Sorensen, CPA
Author: "Susan Spyker" at Internet
Date: 09/25/2000 11:45 AM
Normal
TO: RULE-COMMENTS at 03SEC
Subject: File No S7-13-00.
------------------------------- Message Contents
I am writing to you about the proposed federal regulation being initiated by the
SEC that threatens my profession. Specifically, File No S7-13-00.
If this proposal is approved, I fully expect it to find its way to state
regulators across the country, significantly changing the way accounting firms
do business.
The impact of such a change would be widely felt by forcing accounting firms to
limit their clients to either audit or non-audit services. This limitation
would prove to be a disservice to our clients and have a negative financial
impact on our firm. Twenty percent of our current services are audit or audit
related services.
The Panel on Audit Effectiveness of the Public Oversight Board, which was formed
at the request of your organization, recently concluded that there was no
evidence that the provision of non-audit services has hurt audit quality. In
fact, it concluded that both the profession and the quality of audits are
fundamentally sound and that in numerous instances non-audit services
contributed to a more effective audit.
This proposal restricts freedom of choice by limiting the services an accounting
firm can provide. This type of oversight is unwarranted and intrusive.
Respectfully submitted,
Susan M. Spyker, CPA
Author: ksullivan@wgjcpa.com (Kevin Sullivan) at Internet
Date: 09/25/2000 3:24 PM
Normal
TO: RULE-COMMENTS at 03SEC
Subject: File No. S7-13-00
------------------------------- Message Contents
To Whom It May Concern:
I am writing to you to express my concerns that the recent SEC proposal to
prohibit accounting firms from providing non-audit services to their audit
clients is too far reaching and should not be approved. I agree that the
independence rules must be updated and monitored more closely than ever,
however the current proposal as made by the SEC is too far reaching in
today's international economy and would adversely affect the majority of
smaller firm CPAs.
Please do not support the current SEC proposal as proposed. It would be
detrimental to smaller firms and CPA practitioners who have privately owned
small businesses as their clients.
Sincerely,
Kevin M. Sullivan, CPA
1134 Schooner Way
Saint Paul, MN 55125-9291
612-384-8243
Author: "Brenda Scobey" at Internet
Date: 09/25/2000 4:44 PM
Normal
TO: RULE-COMMENTS at 03SEC
Subject: Fw: S7-13-00
------------------------------- Message Contents
_____________________________________________________________________________
Confidentiality Notice: The documents accompanying this electronic mail message
contain
confidential information belonging to the sender and may be legally privileged.
The information
is intended only for the use of the individual or entity named above. If you
are not the intended
recipient, you are hereby notified that any disclosure, copying, distribution or
the taking of any
action in reliance on the contents of this information is strictly prohibited.
If you have received
this transmission in error, please notify us by telephone (1-616-575-3482).
September 24,2000
Jonathan G Katz
Securities and Exchange Commission
450 Fifth Street. N.W.
Washington, D.C. 20549-0609
Reference file no. S7-13-00
Dear Mr. Katz
I am writing to you regarding the proposed rule which would prohibit public
accounting
firms from performing any other services for sec audited clients. The way the
proposal is written it appears this would apply to all audit clients of public
accounting firms even firms not under the jurisdiction of the SEC.
I am a shareholder in a 42 person public accounting firm. We do not have any SEC
clients.
We do have several audit clients and we perform other services for these clients
such as consulting work, human resource work, computer consulting work,
marketing work, financial planning work and sometimes valuation work. Your
proposal if passed would have a drastic impact on our practice and countless
numbers of other public accounting firms throughout the country. It would also
have a huge impact on the customers we serve. Please reconsider the proposal in
its current form.
Sincerely yours
Michael T Tamm CPA
Echelbarger Himebaugh Tamm @ Co PC
5165 Cascade Road SE
Grand Rapids, Michigan 49546
(616) 575-3482
E-mail miket@ehtc.com
Author: at Internet
Date: 09/25/2000 9:34 PM
Normal
TO: RULE-COMMENTS at 03SEC
Subject: S7-13-00
------------------------------- Message Contents
Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609
Dear Sir,
I am writing in reference to the proposed file no. S7-13-00.
I strongly disagree with this proposal. By separating a CPAs services, it not
does a terrible disservice to our clients and the business community at large.
Clients are better served through a synergy of services for a variety of
reasons. We are able to integrate their retirement goals, personal goals,
financial goals, and tax goals together. We are able to see the complete
picture, and therefore offer more complete service.
If CPA services are broken up, confusion will reign. Businesses will pay more
for educating various entities on their business operations. Even when the
professionals are educated, they then have to be in constant communication with
the other various professionals, thereby decreasing efficiency and increasing
costs. The good this act would do does not even come close to balancing the
harm it will inflict.
Accounting and tax functions are done to record what businesses have
accomplished. A businesses main concern is to do their task as timely and as
efficient as possible. If this act passes, CPAs will be prohibited from doing
the same kind of good business practice.
I hope that the correct decision is made, and S7-13-00 is struck down. I thank
you for your time.
Michael Torres
http://www.sec.gov/rules/proposed/s71300/0925b02.htm
