MAGIC SOFTWARE ENTERPRISES LTD. TEL: +972-3-538-9292 5 HaPlada Street FAX: +972-3-538-9333, 538-9393 Or-Yehuda 60218, Israel EMAIL: Sales@magicsoftware.com VIA EDGAR Mr. Steven Krikorian, Branch Chief Division of Corporation Finance U.S. Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549 Re: Magic Software Enterprises Ltd. Form 20-F for the Fiscal Year Ended December 31, 2006 FILE NO. 000-19415 Dear Mr. Krikorian: I am submitting this letter in response to the written comments of the Staff (the "Staff") of the Securities and Exchange Commission (the "Commission") in a letter to Mr. David Assia, Chairman of the Board of Magic Software Enterprises Ltd. (the "Company"), dated August 6, 2007, with respect to the Company's annual report on Form 20-F for the fiscal year ended December 31, 2006. In this letter, we have recited the comments from the Staff in bold type and have followed each comment with the Company's responses. FORM 20-F FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006 REPORT OF INDEPENDENCE REGISTERED PUBLIC ACCOUNTING FIRM, PAGE F-2 1. THE AUDIT REPORT OF YOUR PRINCIPAL AUDITOR MAKES REFERENCE TO AND PLACE RELIANCE ON THE WORK OF OTHER AUDITORS WITH RESPECT TO THE AUDIT OF CERTAIN SUBSIDIARIES. HOWEVER, IT DOES NOT APPEAR YOU HAVE INCLUDED THE AUDIT REPORTS OF THE OTHER AUDITORS IN YOUR FORM 20-F. NOTE THAT RULE 2-05 OF REGULATION S-X REQUIRES YOU TO THE FILE THE SEPARATE REPORT(S) OF THE OTHER AUDITOR(S). THIS REQUIREMENT APPLIES TO ANNUAL REPORTS FORM 20-F. PLEASE REVISE YOUR FORM 20-F TO PROVIDE THE AUDIT REPORTS OF THE OTHER AUDITORS OR IDENTIFY WHERE THE AUDIT REPORT HAVE BEEN INCLUDED. Response: The Form 20-F has been revised to provide the audit reports of the other auditors.
2. WE NOTE THAT CERTAIN OF THE OTHER AUDITORS USED IN THE AUDIT OF YOUR FORM 20-F ARE NOT REGISTERED WITH THE PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD ("PCAOB"). PLEASE CLARIFY HOW YOU DETERMINED THAT THESE AUDITORS DID NOT PLAY A SUBSTANTIAL ROLE IN THE PREPARATION OF YOUR AUDIT REPORT; WE REFER YOU TO PCAOB RULE 2100. PLEASE NOTE THAT THE TERM SUBSTANTIAL HAS BEEN DEFINED IN PCAOB RULE 1001 (P)(ii). PLEASE TELL US THE TOTAL AMOUNT OF REVENUES AND ASSETS THAT HAVE BEEN AUDITED BY EACH FIRM THAT IS NOT REGISTERED WITH THE PCAOB. Response: The Company respectfully advises the Staff that the auditors that are not registered with the PCAOB and that were used in the audit of our Form 20-F, both: (1) do not perform services that our auditors, Kost Forer Gabbay & Kasierer uses or relies on in issuing all or part of their audit report with respect to our company, and (2) do not perform the majority of the audit procedures with respect to any subsidiary or component of our company, the assets or revenues of which constitute 20% or more of our consolidated assets or revenues. Accordingly, we concluded that these auditors did not play a substantial role in the preparation of the audit report, as defined in PCAOB Rule 1001 (p)(ii). The table below details the assets as of December 31, 2005 and 2006 and revenues for the years ended December 31, 2005 and 2006 of the subsidiaries that have been audited by auditors that are not registered with the PCAOB: FY 2005 IN USD THOUSANDS (% OF CONSOLIDATED) AUDITOR REVENUES % ASSETS % - ------- ------- ------- ------- ------- Levy Cohen & Co. (1) $ 5,604 9% $ 3,523 5% Mock & Partners International (2) 3,077 5% 3,715 5% Maria Negyeffy (3) 1,803 3% 1,846 3% Studio Nassini & Associati (4) 549 1% 919 1% ------- ------- ------- ------- Total $11,033 18% $10,003 14%
FY 2006 IN USD THOUSANDS (% OF CONSOLIDATED) AUDITOR REVENUES % ASSETS % - ------- ------ ------ ------ ------ Levy Cohen & Co. (1) $4,476 7% $3,357 5% Mock & Partners International (2) 3,076 5% 2,314 3% Maria Negyeffy (3) 2,110 3% 1,840 3% Studio Nassini & Associati (4) 174 0% 855 1% ------ ------ ------ ------ Total $9,836 15% $8,366 12% - ---------- (1) Performed the audit of Magic Software Enterprises (UK) Ltd. and Hermes Logistics Technologies Limited (2) Performed the audit of Magic Benelux B.V. (3) Performed the audit of Onyx Magyarorszag Szsoftverhaz (4) Performed the audit of Magic Software Enterprises Italy S.r.l. I am authorized to acknowledge on behalf of the Company and to confirm that the Company is responsible for the adequacy and accuracy of its disclosure in the filing reviewed by the Staff and that Staff comments or changes to disclosure in response to Staff comments in the filing reviewed by the Staff do not foreclose the Commission from taking any action with respect to the filing. The Company further understands that it may not assert the Staff's comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws in the United States. Please do not hesitate to contact us at 972-3-5389305 with any questions or comments you may have. Very truly yours, Magic Software Enterprises Ltd /s/ Ziv Zviel ------------- Ziv Zviel