"We're very much concerned that the independence rules get enacted, but we have some concerns about the proposals," said Robert Goldfarb, president of the National Conference of CPA Practitioners. SEC chairman Arthur Levitt addressed the group Friday at its annual meeting.

Goldfarb said the group is worried about the trickle down effect of the proposed rules, which would ban firms from providing consulting services for audit clients, from SEC registrants to smaller CPA firms.

"Some of (the rules) really shouldn't be affecting how non-public companies are audited," Goldfarb said. While he wouldn't cite specific changes to the proposals that the NCCPAP would like to see, he noted that the group is in discussions with other members of the profession to try to amend the proposals to address small firms' concerns.

"We're trying to get a compromise position not dissimilar to PricewaterhouseCoopers'," Goldfarb told SmartPros. PwC, along with Ernst & Young, broke rank last month with the rest of the Big Five and the American Institute of CPAs by drafting its own proposal calling for limiting the services provided by audit firms to their audit clients.

"We think that's a decent compromise proposal, but we are talking with PricewaterhouseCoopers and E&Y to modify their proposals," Goldfarb said.

"The big question is, will there be a trickle down effect?" said Edwin J. Kliegman, past president of NCCPAP. The fear among small firms is that, "once they put rules in, the various governmental agencies and state boards may say the SEC did it, let's do it as well, and that would effect the small practice units."

Still, Kliegman said it's time for the SEC to put some teeth into the independence rules, and criticized the AICPA, which has been among the loudest voices in opposition to the rules, for looking out for the interests of large firms.

"The AICPA has done little or nothing over the years to enforce the independence rules," but now that the rules might impact large companies, he said, "They're up in arms."

Speaking to the group last week, Levitt reassured NCCPAP members that the proposed rules would apply only to companies that are publicly audited. Levitt said he expects language to be included in the final rules that would ensure that the rules don't impact small accounting firms.

Levitt earlier told Congress in his testimony before the Senate Banking Committee's Subcommittee on Securities last month, "We anticipate that our proposal would have little, if any, impact on smaller accounting firms," most of which do relatively little auditing of financial statements of public companies.

Prior to Levitt's arrival at the meeting, some NCCPAP members expressed their own opinions on the independence issue.

"I believe the SEC should not allow accounting firms to be in the business of management consulting, because it's a conflict of interest," said Nathan Eichner, a sole practitioner in Levittown. "It's kind of tough to advise a client and then report on it. I would prefer to see a greater division between what the accounting firms and their management consulting divisions do."

"I think that there is a definite independence conflict as far as offering management advisory services," agreed Manuel Fishman of Fishman Associates in Rockville Centre. Commenting on the SEC proposal, he added, "I think it's a good law, except there might need to be some modifications not to impede smaller practicing units."

After months of bashing from both sides of the debate since the proposal was issued in June, supporters and critics of the proposal appear to be drawing closer to a compromise. In his remarks to NCCPAP members, Levitt, who said a final rule should be issued within two months, said he "sensed a new willingness by those in the profession who have expressed serious concern about the Commission's rulemaking to come to the table and work through the issues."

-- By Melissa Klein

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