Jonathan G. Katz, Secretary
             Securities and Exchange Commission
             450 Fifth Street, N.W.
             Mail Stop 6-9
             Washington D. C. 20549

             Re:  Comments on Proposed Amendments to Rule 102(e) of Rules
             of Practice (File No. S7-16-98)

             Dear Mr. Katz:

             Thank you for the opportunity to comment on the proposed
             amendments to Rule 102(e) of the Commission's Rules of
             Practice regarding the standards of conduct for accountants
             practicing before the Commission.  Eli Lilly and Company
             supports the Commission's attempt to define with greater
             precision the types of conduct warranting discipline, and we
             concur with much of the proposed definition.  However, as
             explained below, we are concerned that one portion of the
             proposed standard reaches too far.

             We support the standard set forth in Rule 102(e)(1)(iv)(A)
             allowing discipline for intentional, knowing or reckless
             violations of applicable professional standards.  We also
             have no objection, from a practical standpoint, to proposed
             Rule 102(e)(1)(iv)(B)(2) which allows Commission to impose
             discipline for "repeated, unreasonable violations of
             applicable professional standards that demonstrate that the
             accountant lacks competence."  (We note with interest
             Commissioner Johnson's Separate Statement in the proposing
             release, suggesting that the Commission lacks legal
             authority to adopt any form of a negligence standard under
             Rule 102(e).   While we find Commissioner Johnson's
             arguments persuasive, we are limiting our comments in this
             letter to our concerns about the practical effect, rather
             than the legality, of the proposed standard.)

             Our primary concern with the proposed standard is Rule
             102(e)(1)(iv)(B)(1).  Specifically, we are concerned that
             this section could be interpreted to encompass a single act
             of simple good faith negligence or differences of opinion.
             We believe it is inappropriate to sanction accountants for
             good faith differences of interpretation about the
             professional standards, or for isolated negligent errors in
             applying professional standards.

             It appears that this section would allow the Commission,
             with the benefit of hindsight, to disagree with any one of
             the many judgments accountants must make in preparing
             financial statements and thereby subject the accountant to
             sanctions based solely on that disagreement.  As you know,
             the securities laws and generally accepted accounting
             principles require accountants to exercise independent
             professional judgments on a wide range of complex subjects
             ranging from the estimated useful lives of fixed assets to
             the probability that a contingent liability has been
             incurred.  These judgments often require numerous inputs and
             are subject to continued refinements as more information
             becomes available with the passage of time.  While it is
             often easy to criticize judgments with the benefit of
             hindsight, it does not follow that the judgment was
             inappropriate based upon the information available at the
             time.  To subject an accountant to sanction as a result of
             one such situation is inappropriate.  Accountants should be
             free to exercise their best independent judgment without
             fear that a particular judgment might be viewed, in
             hindsight, as subject to sanction by the SEC.   We are
             concerned that the proposed standard may impair the
             relationship between public accountants and their clients
             and between internal accountants and their business
             partners, to the detriment of good disclosure.   As
             Commissioner Johnson points out, professionals "motivated by
             fears for their personal liability will not be consulted on
             difficult issues."

             In addition to our concerns stated in this letter, we are
             aware that the AICPA has prepared a comment letter in
             response to this proposed amendment and we generally support
             the position of the AICPA as expressed in their letter.

                                           Sincerely,

                                           Arnold C. Hanish
                                           Chief Accounting Officer,
                                           Eli Lilly and Company