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: "Lecouras; Alexis Mr." at Internet
Date: 09/09/2000 11:28 AM
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TO: RULE-COMMENTS at 03SEC
Subject: File No. S7-13-00
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This has been a concern of mine every since I started investing 2 years ago.
The auditors are paid by corporations to count the company's beans, but
doesn't this relationship create an opportunity for the corporation to tell
the auditor how many beans it has? The more "services" an accounting firm
has to offer a company, the more dollars the corporation pays, thus
empowering the corporation over the auditor further. I know that
accountants have to follow certain rules when drawing up income statements,
balance sheets, and cash flow statements, but my understanding is that these
rules do provide loopholes that allow a skillful accountant to fiddle with
the numbers. The auditor just has to be given the incentive to use these
loopholes. Given enough incentive, they may choose to forget their moral
obligation as an auditor all together.
I don't even pretend to have a solution to this problem. If the SEC feels
that this is a viable solution, then I am all for it.
As an individual investor, I don't have the resources, the connections, or
the realm of influence to find out what discrepancies may be in the
financial statements of the corporations in which I have my life savings
invested. The SEC was created to insure that the little guy gets all the
facts, and I applaud your efforts to this end.
Thank you.
Alex Lecouras
011-49-621-730-5352
DSN: 380-5352
Author: at Internet
Date: 09/09/2000 2:31 AM
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Gentlemen,
I am very concerned about auditor independence. If you
believe that accountants should not have a consulting
business because that weakens their independence, both
perceived and actual, then stop them. Currently, the
accountants are self-regulated. The problem that exists
is that for the longest time the accountant's wallets
ensured that they remained strictly independent. Why?
Because if the investing public lost faith in their
opinions, then who needs them? Accountants are fearful
of government regulation of them, so they have to dance
a very peculiar dance next to the line of actual
independence and compromise. Now that a new lucretive
source of income has arisen--consulting--the accountants
have become more willing to dance on top of, if not
over, the line. I understand that a challenge has been
made that the SEC has not been forthcoming with examples
of actual indepence violations, but the problem is
fairly recent and many examples will arise.
Perhaps now is the time to impose some muscle before
serious damage is done to our investment markets.
Keep up the good work!
Regards,
Ken Miao
Author: Dave Moody at Internet
Date: 09/09/2000 12:21 AM
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Subject: File No. S7-13-00 Auditor Independence
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I am all in favor of the SEC's proposed new rule enforcing Auditor
Independence. There is no question in my mind that the current climate of
mixing business (i.e. consulting) with the same company on which you are
conducting an audit leads to less than objective audits.
Yours Truly,
David Moody
Davis, CA
Author: at Internet
Date: 09/09/2000 7:19 AM
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There are two problems really at play here. One is the promotion of more
business for the accounting firms and the inherent conflict; the other
problem relates to the pressure that is placed upon those in the firm who
have the least ability to resist - namely the youngest members of the firm.
I have read the various stories in the New York Times, Motley Fool and the
Wall Street Journal concerning this issue. Yes, I think it is wrong that
there is such selective disclosure taking place in the audits. But let's
examine the practices and who carries them out. The newly hired in the firms
are the ones responsible for doing all the heavy lifting for audit work
because these new members are trying to get enough hours of audit practice
(500) for their license to practice. Don't you think the senior partners
might have some real clout in having these dewey eyed accountants-to-be
modify the audit plan? In the whole scheme of things who takes the fall? -
Some cub accountant who is worked to death and wants to get a license after
practicing a year for a big firm. "Hey kid increase the billing in the
consulting area and we might have a place for you there when you finish your
audit work."
Therefore you might look at reducing and or modifying the number of hours
state boards require these young workers to perform in the audit area. Doing
so might reduce the leverage that the senior partners have in this whole
process.
Author: "Michael Poythress" at Internet
Date: 09/09/2000 4:30 AM
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Subject: File No. S7-13-00 - Support for separating non-audit consult
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I would like to voice my support for separating auditing services from non-audit
services. I believe there is a LOT of this that goes on that investors never
hear about, and personally do not like the companies I invest in to be hiding
numbers from me.
The numbers they provide are some of the only evaluation means I have to
consider one company versus another, and if one is providing false numbers, I
cannot make an informed decision. I do not have firm evidence of cases where
non-audit consulting has distorted the audit, but the possibility that it could
happen is chilling. I also trust the SEC and their judgement in this matter.
Michael R. Poythress
Author: Stephen Lange Ranzini at Internet
Date: 09/09/2000 1:25 AM
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I seldom comment on proposed regulations, but this proposed reg really is
very misguided!
Small community banks rely on their external auditors for a wide range of
expertise they cannot afford internally. Internal audits of information
systems by external auditors are absolutely necessary to ensure compliance
with FFIEC mandates. We don't have this expertise internally. At times
when personel leave unexpectedly, internal operational audits must be
outsourced to an external auditor until a qualified replacement can be
found. Two times in my firm's 12 year existence this has been required.
There are a very limited number of firms whose services we can afford.
Should we just stop doing internal audits due to employee turnover?
Prohibiting external auditors from providing these services is a bad idea.
We rely on our auditors to supply these services because they can do it in a
cost-effective fashion and are the go-to experts in banking because they
have the personel and wide industry experience we need.
No one's independence is compromised by providing these services because
different personnel inside the auditing firm provide them. No external
auditing firm would ever depend on our small amount of business so much that
they wouldn't tell us to take a hike if we tried to influence their opinion.
Sincerely,
Stephen Lange Ranzini
Chairman, President & CEO
University Bank
Ann Arbor, MI
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Author: "P. Sinz" at Internet
Date: 09/09/2000 3:07 AM
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Dear SEC:
I normally like to leave the way business's run themselves up to themselves. In
this case I do not believe it is a good idea. Most business's have their own
auditors who work inhouse, but when it comes time for their public audit's they
use a outside auditor. The reason, I think, is to prevent
conflicts-of-interests, or the appearance of same. If business's start using an
independant auditing firm
for other work than auditing then sooner or later there is going to be a
conflict-of-interest or the appearance of one. This is not going to do business
any good and will certainly have a detrimental effect on investors who often
have only these audits to go by as to how a business is doing.
Thank You,
Paul Sinz
Author: "Henry C. Young" at Internet
Date: 09/09/2000 1:32 AM
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Thank You for proposing (and hopefully passing) the separation of auditing
firms also providing consulting services to the same companies, I agree
that, that, is a formula for corruption and mismanagement.
- Henry Young .'.
Author: at Internet
Date: 09/09/2000 12:32 AM
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I agree with the SEC that auditors should be independent. When a firm has a
dual relationship, i.e., consulting and auditing then the risk of unethical
accounting practices exists. The ethical principles of at least some
professions consider the problems inherent in dual relationships and address
them. Since the information provided in company financial audits is
important to the entire financial world they should be without bias and
unduly influenced by auditor/client dual relationships.
Author: Jerome J Augustine at Internet
Date: 09/09/2000 3:23 AM
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I agree with the SEC's proposal to keep auditing and consulting services
separate to prevent conflicts of interest. It seems obvious to me that a
firm that has a lucrative consulting account with a company may be
tempted to produce an audit that puts the audited company in the best
possible light. As a small investor I depend on accurate audits in
making my investing decisions.
Thank you.
Sincerely yours,
Colleen Augustine
Jerome and Colleen Augustine
1104 W. Stratford Dr.
Peoria, IL 61614
coljer@juno.com
309-688-5425
Author: John Behrman at Internet
Date: 09/09/2000 3:39 AM
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I am strongly in favor of stronger rules separating the auditing and
consulting parts of accounting firms. Issues which surface during an
audit are used as openings for the consulting division to propose
solutions, which typically receive favorable audit results the following
year, regardless of the efficacy of the changes.
This is an issue where it is unlikely that specific evidence of
wrongdoing will surface - those cases get settled and you'll never hear
about them. But investors will pay the price.
I strongly encourage separation of these two business areas.
Author: tabc at Internet
Date: 09/09/2000 12:23 PM
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re: File No. S7-13-00
The problem of auditors being allowed to provide consulting services to
companies is in immediate need of remedy.
The Securities and Exchange Commission's arguments for independence of
auditors are thoroughly justified and should be fully supported in order to
protect the investing public.
Tara Cannon
Norristown, PA
Author: "J Clear" at Internet
Date: 09/09/2000 4:05 AM
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To Whom This May Concern at the SEC;
For what it's worth, I would like to see accounting and consulting services
kept separate to prevent conflicts of interest. It is my opinion that with
the ease of individual investors, like me, to do research on companies we
invest in, we should be given every opportunity to learn the truth about
those companies.
Thank you,
J. Clear
jsc5264@hotmail.com
Author: at Internet
Date: 09/09/2000 2:18 AM
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Dear Sirs: It has been brought to my attention that firms auditing the books
of publicly companies have also been receiving consulting fees from the very
companies which they are auditing and that said fees are very lucrative. My
common sense tells me that about the strong possibility of a conflict of
interest existing in such cases can persuade the auditing firm to skew the
results reported about the audited company's economic health. although my
information is that so far, no proof of such activity has been shown, I
believe that regulations should be promulgated as a preemptive measure to
prevent the possibility of such actions by the auditing firms in the
investors' best interest.
Thank you very much for your consideration.
Harold Enloe
Author: "aestevez" at Internet
Date: 09/09/2000 12:35 AM
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I welcome the opportunity to express my hole hearted support for the action that
the SEC is taking to assure the independence of auditors. As a business man,
investor and minister, I feel that this is a step in the right direction. I
cannot imagine why this has not been done before. I truly believe the only ones
opposed to a rule such as this would be those who benefit from the present
awkwardness. The system is plagued with "possibilities" for "Consultants" to
"Overlook" certain areas of a clients audit trail. Specially if it is a rather
sizable "Consulting" client vs. it's potential for auditing.
The agency has a legal (as well as moral) responsibility to safeguard the Public
Perception of the Market. It also has to protect investors from unscrupulous
profiteers. Although in all fairness I must admit that the actual number of
these unscrupulous operators are a MINIMAL percentage of the outstanding
business and accounting professionals in this great market environment.
André Estévez
Author: Fred Reinders III at Internet
Date: 09/09/2000 12:11 AM
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If you do not separate the two functions , you can demand a nice
retirement nest egg to retire with. fredr@ior.com
Author: at Internet
Date: 09/09/2000 6:54 AM
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Subject: "File No. S7-13-00"
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To Whom It May Concern:
I would like to see outside (consulting) services separated from auditing
services in a meaningful way.
I am an individual investor who makes decisions based on what I see in a
balance sheet through the quarterly and annual reports. I need to trust that
the data there is true, because I have no other way of accessing meaningful
information about a company.
Regards,
Pam Galligan
1939 Berkshire Place
Wheaton, IL 60187
Author: "Barbara Greig" at Internet
Date: 09/09/2000 6:12 AM
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I am in agreement with your investigation of supposedly independent auditors
acting as consultants for the same firms they are auditing. If it is not a
conflict of interest, it certainly has the potential become so.
Sounds as if the fox is guarding the henhouse to me.
http://www.sec.gov/rules/0909b01s.htm