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To: Logain Ablar who wrote (24578)	6/27/2000 2:10:00 PM
From: Lee Lichterman III	Read Replies (1) \| Respond to of 42787

SEC proposes new auditor rules By William L. Watts, CBS.MarketWatch.com Last Update: 1:59 PM ET Jun 27, 2000 NewsWatch Latest headlines WASHINGTON (CBS.MW) - The Securities and Exchange Commission voted unanimously Tuesday to propose new rules that would strictly limit the types of consulting services audit firms could provide to their audit clients. Today on CBS MarketWatch U.S. to block WorldCom-Sprint merger Tech sector mixed while blue chips gain Media Metrix buying Jupiter Stratos Lightwave prices above range Treasurys quiet ahead of Fed meeting More top stories... CBS MarketWatch Columns Updated: 6/27/2000 11:20:30 AM ET The move comes amid the agency?s concerns that the increasing array of non-audit services provided by many firms could lead auditors to pull their punches when reviewing a client?s financial statements out of fear of jeopardizing lucrative consulting contracts. ?Without confidence in an auditor?s objectivity and fairness, how can an investor know whether to trust the numbers?? Levitt said in opening remarks at the meeting. ?Sound and verifiable numbers are to financial markets what oxygen is to breathing. Our financial markets simply cannot work without access to strong, high-quality financial reporting.? The proposal would prohibit a range of services that would be inconsistent with auditor independence. The services include bookkeeping, financial information systems design and implementation, appraisals, actuarial services, internal audit outsourcing, management functions, human resources, investment banking services, legal services and expert services. The agency will hold a series of public meetings on the proposals, which are subject to a 75-day public comment period. The measures have already drawn heavy fire from some accounting firms, who contend there is no evidence that their rapidly growing consulting arms have jeopardized the quality of their audits. But senior SEC staffers contend it?s difficult to gauge the influence of the consulting relationships on individual audits. What?s more, by the time a serious incident arose, it would be too late, said SEC Chief Accountant Lynn Turner, an architect of the proposed rules. ?I?m not sure as a regulator that I want to wait until there is a problem to decide whether or not I want to address an issue,? Turner told reporters after the meeting. Critics also contend the measures will force firms to spin off their consulting arms - some firms have already taken steps toward divestitures. Not all firms oppose the measures. PricewaterhouseCoopers, the world's largest accounting firm, praised the SEC?s efforts Monday. "We believe the public interest ought to take precedence over self-interest," the firm said in a statement. "Our restructuring efforts are meant to achieve those same objectives, while ensuring our ability to provide cutting-edge services to our clients worldwide." PricewaterhouseCoopers announced in February a plan to restructure its business into at least two operating units, separating its auditing, tax and business advisory practices from its management and human resource consulting activities. An independent study by the SEC earlier this year found numerous violations of auditor independence rules at the firm. The proposals would also loosen up far-reaching restrictions that currently handcuff spouses of audit firm employees when it comes to their personal financial holdings. Under current rules, for instance, a husband who works at a bank that offers a 401(k) plan would be unable to participate if his wife was a partner at the bank?s audit firm, even if the husband didn?t work on any financial institution clients. ?Does that make sense today?? Levitt asked. cbs.marketwatch.com Good Luck, Lee