Report of the President

Last year, as Vice President-Academic, I marveled at the contributions and accomplishments of the Executive Committee and of so many members who are actively engaged in our Section's activities. I will review a selection of these activities, but first I wish to thank all of the members of the Auditing Section for providing me this opportunity to serve as president during the coming year. It is an honor to work with such talented and dedicated individuals. I will do my best to follow the consistently high standards established by my immediate predecessor, Jean Bedard, and those before her. Also, on behalf of the Auditing Section, I would like to personally and publicly acknowledge the outgoing members of the Executive Committee, Joe Carcello—Past President, and Bill Dilla—Secretary, for their outstanding service. Both worked diligently on our behalf, but did so modestly and in a seemingly effortless manner. It is a bit misleading, for Joe created enough initiatives to keep himself (and the rest of us) busy for quite some time. Bill somehow kept up with all of these, plus some, so that nothing fell through the cracks (he truly acted as a very effective internal control). While their contributions to the Section would likely qualify for a separate publication in this issue, neither would feel comfortable, I am sure, with any more than a heartfelt thank you. So, to you both, on behalf of the Section, I offer our sincerest gratitude.

Past President Jean Bedard passes the gavel to incoming President Linda McDaniel at the AAA Annual Meeting in Orlando

I also would like to welcome our two newest members of the Executive Committee: Mark Beasley as Vice President–Academic and Kay Tatum as Secretary. Both are already hard at work, in spite of Kay's recent evacuations from Florida because of Charley, Francis and Ivan! Finally, it is a privilege to acknowledge our returning Executive Committee members. Scott Showalter (KPMG LLP), Vice President–Practice; Jeff Cohen, Treasurer; Karen Pincus, Historian; and Jean Bedard, our Past President. I am very fortunate to be able to serve with such dedicated and distinguished colleagues.

Our Section is the largest of the AAA's sections and is extremely active on numerous fronts. We have much to be proud of and so much to look forward to. I would like to highlight just a few of our recent, ongoing, and planned activities. Our most recent activity was the AAA Annual Meeting in Orlando. The Auditing Section was well-represented, as issues related to auditing and assurance services continue to grow in importance. There were 38 auditing papers presented at 13 concurrent sessions, with four sessions dealing with SOX and Corporate Governance issues; we had 14 papers in the research forum and had two panel sessions. The two panels were "Preparing Students for Today's Audits" and "Internal Auditing and the Sarbanes-Oxley Act of 2002: Lessons Learned and the Implications for Education and Research," both of which address challenges that auditing educators face. In addition, our Section and members were involved in several of the CPE offerings. I would like to acknowledge the efforts of Mike Ettredge (University of Kansas) and Bryan Church (Georgia Institute of Technology), Director and Assistant Director of the 2004 Annual Meeting Committee, respectively; and Greg Burton (Brigham Young University), Director of CPE; and thank the many members who submitted or volunteered to review papers.

We owe our appreciation to our annual meeting luncheon speaker, Andy Bailey, currently serving as Deputy Chief Accountant in the Office of the Chief Accountant of the SEC. Andy's engaging talk and the subsequent Q&A focused on rebuilding trust in the accounting profession. Andy began by stating that trust in the accounting profession can improve only if we all do our jobs, and encouraged us to be more constructively critical of the profession than we have been, using our research findings as our basis — even if the results are not what the profession wants to hear. In the current professional environment, we have growing opportunities to be involved in shaping our profession through both teaching and conducting practice-relevant research.

Andy Bailey speaking at the Auditing Section Luncheon at the AAA Annual Meeting in Orlando

Traditionally, each incoming President sets forth one or more goals for the Presidential term. In the upcoming year, my initiatives will be aimed at addressing two broad challenges. The first challenge is to find ways to assist faculty in better training future auditors for the profession, and to promote our ability to conduct relevant research on auditing and assurance services. The second challenge relates to a AAA initiative begun by Bill Felix, to find solutions to problems of declining AAA memberships and reduced Ph.D. enrollments in accounting. Thus, one of my initiatives is to create situations for our members and the profession, including policy boards, to interact in ways that will foster teaching and research opportunities. This dovetails with two broadly-stated objectives begun under Joe Carcello's and Jean Bedard's Presidencies — to gain greater exposure to regulators and standard setters for auditing-related research and to develop a relationship with the PCAOB. I also hope to increase the value of the section to a greater number of educators by expanding outlets for sharing practice-relevant research and by promoting the importance of the efforts of our Section in shaping policies and regulations, thereby addressing our second challenge.

Related to the first initiative, I am pleased to announce an inaugural joint symposium between the PCAOB, the Auditing Section, and the AAA to be held December 9th and 10th of this year, at the PCAOB offices in Washington, DC. The PCAOB is inviting approximately 30 academics for a one and one-half day symposium that will allow both sides to address important issues affecting the accounting and academic professions. We will try to make the content of the symposium available to all members of the Section. I would like to thank the academic members of the planning committee: Bill Kinney, particularly for his vision, and Zoe-Vonna Palmrose, as VP–Research for the AAA, for her instrumental efforts in making possible this symposium. In addition, I would like to gratefully acknowledge Gary Holstrum, Associate Chief Auditor and Director of Research for the PCAOB (and Auditing Section member), for moving the joint symposium proposal from a dream to a reality.

Presently, the Auditing Section is proactively engaged in other initiatives aimed at creating opportunities for our members, the profession, and regulators to interact in ways that foster teaching and research opportunities. Working behind the scenes is the Section's Practice Advisory Council (PAC). Created last year, the PAC is now staffed with representatives from all Big 4 accounting firms, BDO Seidman, Grant Thornton, McGladrey & Pullen, the AICPA, the GAO, the IIA, and the IAASB. PAC members working on our Education and Research Committees (chaired by Eric Johnson and Mike Willenborg, respectively) serve valuable roles in facilitating these opportunities. Recently, the Education Committee and PAC Education Initiative Task Force sponsored a panel at AAA and are now working on finding ways to share the accounting firms' educational and training materials with academics. For example, KPMG, through its 404 Institute, is making available a new Self-Guided Review of PCAOB Auditing Standard No. 2. The review defines the key terms used in the Standard and provides information important to teaching the process of auditing and reporting on internal control. The Education Committee also is investigating the demand for and feasibility of creating an on-line journal to distribute teaching- and practice-relevant information in a timely manner. We hope to present a report from this committee at the Business Meeting at our upcoming Midyear Conference in New Orleans.

The Research Committee and PAC Research Initiative Task Force are actively evaluating research proposals submitted this summer on two topics deemed highly relevant to current practice: internal control assessment under the Sarbanes-Oxley Act and risk assessment. The PAC, with its direct firm / organization connections, plans to sponsor selected proposals by facilitating researchers' access to personnel and / or non-confidential data.

Other committees actively working on initiatives include the Auditing Standards Committee (ASC), under the leadership of Roger Martin. The ASC will respond to proposed ASB, PCAOB, and IAASB standards, as appropriate, and publishing its comment letters on the Section's web site. The Communications Committee, chaired by Kenny Reynolds, is presently looking into the possibility of developing a searchable index for The Auditor's Report. This would be a valuable resource to the members given the increasing number of relevant articles related to both teaching and research. Julia Higgs is spearheading our largest committee, that of Memberships and Regions. Julia and her committee are actively working to increase the value of all meetings to the general membership as well as increase the section membership itself. This committee also is working with the Education Committee on assessing the feasibility of the on-line teaching and practice journal.

Finally, the co-chairs of our 2005 Midyear Conference Program planning committee, Mark Peecher and Billy Soo, and their committee members are putting together an exciting program for the Auditing Section's 11th annual Midyear Conference (MYC), to be held on January 13–15th, 2005 in New Orleans. For our plenary session on Friday morning, they have lined up Cynthia Cooper, Time Magazine's 2002 Person of the Year, and Glyn Smith, both of WorldCom internal audit / whistle-blowing fame.

This year, our MYC includes a special anniversary event you will not want to miss. On the Thursday preceding the MYC, a date normally reserved for CPE, we will commemorate the 25th anniversary of Auditing: A Journal of Practice and Theory. Bill Messier, current Editor of AJPT, proposed a one-day conference consisting of three invited and three competitive papers, to be published in a supplemental issue of AJPT, to observe this milestone. Thank you, Bill, for your generosity on multiple accounts to make this happen. Following the paper sessions, everyone will be invited to a celebratory buffet dinner / welcome reception. The registration form and additional information are located within this issue of The Auditor's Report. All events are included in a single registration fee (the same as last year). Please be sure to mark your form to indicate those events you will attend, so that we can to properly plan an outstanding MYC for all and avoid paying unnecessary meal costs (and avoid raising registration fees in the future).

The day before the MYC, the Auditing Section and KPMG LLP will sponsor our annual Doctoral Consortium. Mark Nelson, Chair of the 2005 Doctoral Consortium Committee, has developed a program designed to benefit any doctoral student, regardless of research interest and / or stage in the program. Because of the generous sponsorship of the KPMG Foundation, the Consortium is free to doctoral students, including one free hotel night, meals, and a special reception on the day of the Consortium. To encourage doctoral students to attend the MYC, their registration fee for the balance of the meeting is only $25. Please encourage your doctoral students to attend, as this is a wonderful opportunity both for learning and for making contacts that they will value throughout their careers. As an added incentive, the Auditing Section offers complimentary AAA and Section memberships for up to two years for all doctoral consortium attendees.

Looking ahead to 2006, the Auditing and International Sections will hold their Midyear Conferences jointly. We plan to have several joint conference sessions and receptions, including some joint sessions for our doctoral consortium attendees, while still maintaining the integrity and value of our traditional MYC. Although we are still in the process of identifying a suitable venue, the planning committees (co-chaired by Mark Defond and Todd DeZoort from the Auditing Section side) are already hard at work. We are excited about the possibilities for sharing ideas and expanding our own boundaries.

In closing, I wish to offer my sincerest thanks to all of the many Section members who contribute their time, effort, and creativity to make us the successful Section that we have become. There are so many worthy, behind-the-scenes activities not highlighted in this letter that could only occur with the generosity of our volunteers. My gratitude to you all! I also wish to thank you again for providing me the opportunity to serve as President this year. Please feel free to contact me, or other Section officers and committee chairs, if you have comments or questions regarding Auditing Section activities. Our activities and contact information are on the Section's web site, expertly maintained by Glen Gray and reported in The Auditor's Report, which is diligently edited by Rich Houston and Jim Bierstaker. If you have the opportunity, please thank these individuals as they truly do a wonderful job. I am looking forward to seeing you all in New Orleans!