Date:    08/23/2000  2:31 PM

Subject: Reference file:  S7-13-00

I am a small practitioner in middle TN, and have become aware of the new 
rules proposed by the SEC to prophibiting audits by firms that perform 
non-audit services to the client.  Although I do not perform SEC audits, I 
have formerly worked for a firm that did, and I wish to register my comments 
regarding this proposal.  I am very much against this proposal without 
further study.
     
I believe that even the SEC would agree that there is no evidence that 
supports the premise that non-audit services have compromised audit quality 
or auditor independence.  In fact, I'm not aware of an audit failure that is 
the result of performing these kinds of services.  In the firm I worked for, 
I did work on SEC audits and was independent, and in my case the non-audit 
services were performed by other professionals of the firm.  I would venture 
to guess that this is true in most firms performing audits for SEC clients.
     
I understand that the SEC has ignored the conclusion of the current Panel on 
Audit Effectiveness of the Public Oversight Board.  According to the 
literature I've read on this subject, the panel concluded:  "both the 
profession and the quality of audits are fundamentally sound."  The panel 
went on to conclude that in most cases, non-audit services actually 
contributed to a better audit.
     
So, why is this proposal being made?
     
I believe this proposal would probably increase my ability to provide 
contract services for SEC clients, but would unnecessarily take away public 
companies' freedom of choice when seeking outside professional services. This 
would force these firms to choose between hiring a firm as it's auditor, or 
solely as a provider of other services.  Even though enactment of this 
proposal would increase my ability as a sole practitioner to provide these 
types of services on a contract basis, I still disagree with the proposal on 
the grounds that this is regulating an area that does not require additional 
regulation.
     
Under the proposed rules, a public company might actually be compelled to 
dismiss an audit firm that has done consistently good work in order to obtain 
services from non-audit colleagues which might actually hurt the quality of 
the work.
     
The proposed rule would impute to an accounting firm the activities of 
virtually any entity with which the accounting firm has a commercially 
valuable business relationship by viewing such an entity as an "affiliate of 
the accounting firm."  I believe this may raise some questions that no one is 
prepared to answer this early in the process.  This would preclude accounting 
firms from entering into almost any partnership which could be construed as 
impairing the accounting firm's independence.  These partnership's may 
actually be with other non-audit clients in which the firm has only an 
immaterial ownership, but could preclude the firm from performing audits of 
any related parties.  This sounds too restrictive to an accountant who works 
in a small community market.
     
I believe the SEC has rushed to regulate an area that doesn't need further 
regulation without increased study of the subject matter.  
     
If this rule is adopted, there will be a negative effect on recruiting and 
retention of the best accounting talent.  The best audit professionals will 
not want to be at a firm where 25% - 40% of the market is "off-limits", and I 
think the same is true for the best non-audit professionals.  The best 
students will not be drawn to firms with a limit on possibilities of moving 
to good companies, or moving up within the firm.  I believe this will hurt 
"audit only" firms which is what the industry would end up with.
     
This scope of services rule must not be allowed to go forward without further 
study of the ramifications.
     
Sincerely,
     
Jeanette Warren, CPA
1265 Windsor Dr, Gallatin, TN  37066