September 26, 2000
The Honorable David R. Obey The Honorable José E. Serrano Dear David and José: I write to express my concerns about potential interference in the Securities and Exchange Commission’s rulemaking on auditor independence. Accountants hold what is, in effect, a public trust. Through many Congressional hearings in the 1980s and into the 1990s, two things became very clear to me -- that the work of auditors is critical to the integrity of the financial reporting process and that in too many situations, when faced with conflicting incentives, auditors’ ability to fulfill their responsibilities to public investors is dangerously compromised. SEC action in the area of auditor independence is long overdue. While some have asked the Commission to ban firms from providing any non-audit services to audit clients, the Commission has taken a much more targeted approach. They are setting out general principles that would guide investors and auditors alike when they analyze these issues. Those provisions address only ten non-audit services provided to audit clients. The SEC has held several days of public hearings on these provisions and is in the process of reviewing the extensive comments received. Last week, Ernst & Young and PricewaterhouseCoopers offered a compromise proposal that also is being seriously considered. I am asking for your support in assuring that nothing is done to frustrate the Commission’s efforts to protect the confidence of investors in our markets. I understand that legislative language is being shopped that would shut down or significantly impede the SEC’s rulemaking process. I am asking your help in making sure that no such rider is included in any pending appropriations legislation. I look forward to talking to you about this issue and I thank you for your consideration. Sincerely,
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