"We would support restrictions on the types of consulting services accounting firms provide -- including internal audit outsourcing -- because we believe that changing market forces are making it increasingly difficult for firms to provide these services alongside their assurance practices," James J. Schiro, chief executive of PwC, told the Commission at the auditor independence hearing in Washington, D.C.

The SEC has issued a proposal to modernize the rules for auditor independence, limiting the services provided by the audit firms to their audit clients which, in turn, could force accounting firms to sell their consulting units.

In essence, PwC and E&Y support SEC's recommendations; however, the firms said they will submit their own version of the proposal to the Commission.

"We ask the Commission to consider our proposal carefully and ultimately to adopt our proposed modifications to the final rule," said Philip Laskawy, chairman of E&Y. "Our approach would address most of the issues that were raised in the Commission's rule proposal but, at the same time, it would protect our ability to serve the needs of our audit clients in a fast-changing and global market place."

The SEC's controversial proposal has struck a nerve with many in the profession, including the American Institute of CPAs, Deloitte & Touche, Arthur Andersen and KPMG.

Deloitte & Touche and Arthur Andersen oppose the proposal and believe that consulting units enable audit firms to perform higher quality audits because they have more knowledge of the client's business. KPMG, who also opposes the proposed rule, is scheduled to testify before the Commission on Thursday.

Both PwC and E&Y have made the move to sever ties with their consulting arms. E&Y sold its consulting business to Cap Gemini earlier this year and PwC is in talks with Hewlett-Packard to sell it consulting unit.

Arthur Andersen and Andersen Consulting made news in August when Colombian arbitrator Guillermo Gamba split up the two entities. And KPMG has filed to take its consulting division public.

Despite the fact that PwC will likely spin off its consulting business, Schiro insists he is not acting out of self-interest - it is the way the business is heading.

"There are those who drive looking in the rearview mirror and those who drive looking ahead," he said. Revising the auditor independence rule "is essential," he added.

-- By Antoinette Alexander

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