I understand that very much and appreciate that

11 Jul I understand that very much and appreciate that

COMMISSIONER HUNT: I understand that. I still think this agency, as an institution, might be very interested in seeing that information.

COMMISSIONER CAREY: Could I ask another question,Mr. Chairman? Strange, because he brought up what I have long thought was a very interesting topic, which is that the divergence between the consulting arm and the auditing arm of Big 5 firms is driven more by market forces than regulatory concerns.

Given that, why is there, on the part of the three of you here today, resistance to something that is, perhaps, evolving quite naturally?

MR. STRANGE: First of all, what we are separating is not everything on this list of what you would call non-audit services. It is our systems integration business, and it has evolved to where it has evolved. Because of the needs for capital it needs a different business model. It competes for a different type of professional with a different set of competitors.

It’s not something that we necessarily intended 20 years ago when we started it but what it has evolved to, and we are reacting to that and have been reacting to it long before this rule-making started. We actually began to talk to Chairman Levitt and the chief accountant some two yearsago about this subject. But it was purely driven by market forces.

It needs to make acquisitions to be big enough to compete, a whole different set installment loans Indiana of ics that affect that business

You may say that some of the other services we continue to house in the firm that are non-audit services might evolve to the same point. I don’t think it’s likely because of the magnitude of these services and the nature of them.

Information technology drove what has happened to our systems integration business. Who would have foreseen what has happened in the last decade 20 years ago? My concern — and maybe I haven’t articulated it as well as I wanted to.

I’d like to again address this to Mr

But my concern about the type of ban on non-audit services really runs to our ability to build the kind of skill sets inside the firm to discharge the audits of the future, and the audits of the future are not that far away from us. And I think we have great difficulty doing that under this rule-making proposal.

Now, I’m not smart enough to predict 10 or 15 years whether some of those kinds of services like this information risk management business that I spoke of a minute ago that I think will be likely 40, 45 percent of our audit effort in another half decade, if something happens in the far future that causes that to need a separate business.

But certainly, in the near term, trying to deliverunder our responsibility in the capital market system, that is something that has to be part of the audit delivery.

COMMISSIONER HUNT: If we came up with a rule that said none of the firms could provide any of the prohibited services to their audit clients, but, of course, you could provide those services to your non-audit clients, and every firm would be, obviously, in the same boat or box, would you think that was a workable rule?

MR. GARLAND: Because I don’t think there’s any economic or business reasons for consultants to continue to be in the same organization with the auditors.

COMMISSIONER HUNT: So you would think that that would lead to, because you were not providing, sort of, integrated services to your audit client, it would lead to a automatic disassembling of the firm?