Report of the President

It is an exciting time and an honor to be the President of such an outstanding Section of the AAA. Since returning from New Orleans and our 2005 Midyear Conference (MYC), I have had numerous calls, emails, and personal comments suggesting that this was an outstanding meeting. As reported elsewhere in this issue, the Midyear Conference drew a record attendance for both the Doctoral Consortium (50) and the MYC (303). We also celebrated another milestone with a conference commemorating the 25th Anniversary of AJPT.

In this report, I would like to acknowledge the speakers at the 25th AJPT Anniversary Conference and Doctoral Consortium and then briefly summarize the main events from the MYC and Business Meeting. I also would like to express my gratitude for the numerous people who worked behind the scenes to make this event such a success. I cannot acknowledge everyone involved, but please know that your efforts are appreciated.

On Thursday, we had over 160 attendees at the 25th Anniversary celebratory conference. Bill Messier commissioned three papers, selected four manuscripts, and invited comments from seven discussants that will be published in a special edition of AJPT later this year. In the first invited session, Mark DeFond (University of Southern California) and Jere Francis (University of Missouri-Columbia) spoke on the future directions of economic-based empirical research. In the second and third invited sessions, respectively, Hun-Tong Tan (Nanyang Technological University) presented his and Mark Nelson's (Cornell University) views on judgment and decision making research in auditing and Bill Kinney (University of Texas at Austin) provided an institutional — and historic — view of where we have come from, where we are, and the prognosis for the future of our profession. Joe Carcello (University of Tennessee), Ken Trotman (University of New South Wales), and Dan Simunic (University of British Columbia) provided insightful and thought provoking discussion comments for the three respective sessions. We look forward to seeing these presentations (and the invited papers and discussion comments) in print.

The 6th Annual Auditing Section Doctoral Consortium also was held on Thursday. There were 50 students in attendance at this year's Consortium, representing schools from across the country. Speakers included Bill Kinney (University of Texas at Austin), Mark Penno (University of Iowa), Steve Kachelmeier (University of Texas at Austin), Jere Francis (University of Missouri-Columbia), and Mark Peecher (University of Illinois). The Editors' panel, chaired by Karl Hackenbrack (Vanderbilt University), featured Mike Bamber (University of Georgia), Rick Tubbs (University of Iowa), and Zoe-Vonna Palmrose (University of Southern California). Many thanks go to the Doctoral Consortium Planning Committee, and particularly the Committee's chair, Mark Nelson (Cornell University), for developing this fine program. The Doctoral Consortium provides Ph. D. students with the opportunity to interact on a personal level with some of our top scholars, and to hear perspectives on the main types of auditing research. Support for the Consortium is provided by the KPMG Foundation, over and above their support for the Midyear Conference. We again thank the KPMG Foundation for enabling the Auditing Section to provide this valuable benefit for our new scholars.

Before outlining the main events of the MYC, I would like to offer my heartfelt thanks to those who offer so much to the Auditing Section. First, my appreciation is extended to all the members of the Executive Committee. Their dedication is what makes the Section so beneficial for us all. The following is just one example of this dedication: Kay Tatum found it necessary to evacuate Miami during one of last year's hurricanes. She headed to Atlanta with very few possessions, but among those were the notes from her first Executive Committee meeting as Secretary this past August. This is not necessarily what I would have been concerned about protecting! Others have obviously noticed another of our Executive Committee's dedication and qualities — Joel Demski recently asked Scott Showalter (and Scott accepted) to be the next VP of Professional Relations for the AAA. Congratulations, Scott — and how lucky for AAA!!! They have no idea of the value of the asset they just acquired!! Thank you Kay and Scott — and my appreciation also to Jean Bedard, Jeff Cohen, Karen Pincus, and Mark Beasley — you all make this position quite enjoyable. Finally, while she is not a member of the Executive Committee this year, I would like to thank Julia Higgs for once again serving as our official photographer. We are fortunate to have her in our Section.

Second, I offer a very special thank you to the Midyear Conference Co-Chairs, Mark Peecher (University of Illinois) and Billy Soo (Boston College), and to the other members of the conference program committee: vice chairs Mark DeFond (University of Southern California) and Todd DeZoort (University of Alabama); and members Christine Earley (University of Connecticut), Marshall Geiger (University of Richmond), Doug Prawitt and Steve Glover (Brigham Young University). The Committee put together an outstanding program, with Billy Soo and Mark Peecher organizing the 25th AJPT Anniversary Conference as well. I am personally quite grateful for all they did to make the meeting a success. We owe appreciation to two others — Bill Messier and Mark Nelson — who put together the programs for the 25th Anniversary Conference and Doctoral Consortium, respectively. Both events were excellent and very well received.

Another very important factor in our ability to develop the tradition of high quality Midyear Conferences is the continuing generous support of the KPMG Foundation, which has provided funding for these meetings (including the Doctoral Consortium) since their inception. We thank all of the personnel of the KPMG Foundation for their generous support, and especially want to recognize Bernie Milano, who through the years has been instrumental in helping the Auditing Section, and Eddie Munson, who now serves as KPMG's Partner in Charge of Recruiting and Faculty Relations and also is a member of the KPMG Foundation Board.

Now I turn to the highlights of the MYC. The program began with a plenary session in which Cynthia Cooper (President of Cynthia Cooper Consulting) and Glyn Smith (Director of Internal Audit at MCI) spoke to a captivated audience. I believe I speak for most in attendance that an additional hour or two would have been very welcomed! Speaking from their personal experiences in the rise and fall of WorldCom not only left us with many lessons to take to our classrooms, but also provided food for thought for navigating our personal and professional lives. Many of us will take the 3 S's of ethical decision-making back to our classrooms. We very much appreciate Cynthia's and Glyn's willingness to share their experiences at our meeting. I also would like to thank Jodi Swauger and the Institute of Internal Auditors (IIA) for providing special gifts to our speakers, a generous gesture that was greatly appreciated.

Thirty-three research papers were presented in paper sessions, as well as three instructional cases; 17 additional papers were at the Research Roundtable. These papers addressed a broad array of topics and research methods. In addition, there were several panel sessions, which were particularly useful in providing information to help improve our teaching and research. The plenary panel considered the topic of "Auditor Independence." This panel was sponsored by the Auditing Standards Committee. Gary Holstrum (PCAOB), Jean Wyer (PwC), and Zoe-Vonna Palmrose (University of Southern California) presented different perspectives on auditor independence. Those attending this panel session may never again view independence or Jean Wyer in the same way!

In addition, there were four other concurrent panels. On Friday, Jim Sylph (IFAC and Technical Director of IIASB), John Fogarty (Deloitte & Touche LLP, Chair of the U.S. ASB and member of the IAASB), Tom Ray (PCAOB and Deputy Chief Auditor), and Jeanette Franzel (GAO and Project Manager for The Yellow Book) discussed "Global Convergence- near or far?" The audience learned about some of the accomplishments in achieving standards convergence to date, future challenges in that area, and also about the "Supreme Auditors" around the world.

Friday's program also included a panel sponsored by the Education Committee and the IIA on "Corporate Governance: New Directions for Management Education." The panel speakers included John J. Fernandes (AACSB), Scott Reed (KPMG Audit Committee Institute) and Jane Mutchler (Georgia State University and AAA President).

On Saturday, the Research Committee sponsored a panel featuring an elite lineup of past, current, and future AJPT journal editors. The panel entitled "An AJPT Editor's Perspective on the Past, Present and Future of Auditing Research" consisted of Dan Simunic (incoming AJPT editor), Bill Messier (current editor), Arnie Wright (past editor), and Bill Felix (former editor).

The fourth panel, sponsored by the Education Committee, focused on an important topic for educators. Paul Herring (AICPA), Richard Wood (Grant Thornton Canada), and Gary Peters (University of Arkansas) spoke on "IT Skills and Knowledge for Entry-Level Auditors: Are Educators Meeting the Needs of the Profession."

At our two luncheons, we presented our five annual awards celebrating the achievement of members in teaching, research, and service. This year's winners, who are at very different stages in their careers, are all truly inspiring in their commitments to all facets of educational endeavors. Tim Bell (KPMG), this year's winner of the Distinguished Service Award, is well known to us all because of his involvement in so many aspects of the Section, including having served as President of the Auditing Section. Scott Showalter (KPMG), the chair of the committee, presented the award but clarified that, because of the potential for perceived independence problems, he did not vote in the selection process!

Kathryn Kadous (Emory University) won the Notable Contributions to the Auditing Literature Award for her 2000 The Accounting Review article entitled, "The Effects of Audit Quality and Consequence Severity on Juror Evaluations of Auditor Responsibility for Plaintiff Losses." This year's award committee was chaired by Rachel Schwartz (University of Illinois). The article is notable for its title length as well as its contributions to academic research.

Steve Albrecht (Brigham Young University) is this year's winner of the Outstanding Educator Award. Steve was recognized for his numerous contributions to auditing education, both in terms of his teaching as well as his research. His influence on practice issues was also quite evident. After announcing Steve as this year's recipient, Jean Bedard, chair of the award committee, indicated that Steve was unable to attend the conference because of recent back surgery. His attendance was missed, but his impact on the profession continues.

Tim Bell (KPMG) and Ira Solomon (University of Illinois) won this year's Innovation in Auditing and Assurance Award, for their innovative development of cases in strategic-systems auditing. The award selection committee, chaired by Karla Johnstone (University of Wisconsin m– Madison), noted that the number of requested printed copies and downloads of these cases clearly showing the significance of their impact on our profession.

Shawn Davis (Georgia State University) is this year's winner of the Outstanding Dissertation Award for her thesis paper entitled, "Market Response to Auditor's Reports: A Reexamination of Auditor Materiality Thresholds." Vicky Hoffman (University of Pittsburg), chair of the award committee, presented the Dissertation Award to Shawn and also recognized Ron King with the Outstanding Dissertation Chair Award.

Let me turn now to a report on the Section's Business Meeting, which took place at the Midyear Conference. The Section's members voted this fall to fill the offices of VP–Academic (President-Elect) and Treasurer. The 260 members who cast votes elected Ray Whittington DePaul University) as incoming VP–Academic (President-Elect) and Kathryn Kadous (Emory University) as Treasurer. Ray and Kathryn will assume their positions at the Section's luncheon at the AAA Annual Meeting this August in San Francisco.

The Treasurer's report was also featured on the Business Meeting agenda. As you will note from this report (published elsewhere in this issue), the financial condition of the Section continues to improve. The Section's cash balance stood at $217,107 on November 30, 2003 (the end of the first quarter of the current fiscal year), up from $173,085 at the same time last year. Some of the increase is caused by different timing of certain events across years (given the AAA's cash basis system). In addition, $30,000 is in escrow to cover the expenses of the 25th Anniversary Conference. However, this still represents a substantial increase over the previous period. Jeff reported that we should not expect to continue this trend because of the anticipated increase in Editor support and AAA charges. With this said, our financial condition and future are very sound.

Bill Messier (Georgia State University) presented the Editor's report for Auditing: A Journal of Practice & Theory, which also appears elsewhere in this newsletter. Bill's term will end this summer and he accepts his last submissions in May 2005. Our sincere thanks to Bill and his editorial board whose combined efforts have made this journal a high quality outlet for our research. We also thank Dan Simunic (University of British Columbia), who will be the journal's incoming editor this summer, serving for the next three years. We believe Dan's previous experience in editorial positions will serve to enhance the quality and reputation of our journal.

The Business Meeting also featured reports by Chairs or members of the Section's standing committees, through which much of the Section's work is done: Auditing Standards Committee (Roger Martin), Communications Committee (Jeff Payne for Kenny Reynolds), Education Committee (Eric Johnson), Membership and Regional Coordinators Committee (Julia Higgs), and Research Committee (Mike Willenborg). I thank each of these individuals and their committee members for all of their efforts on behalf of our Section. I also wish to thank Jay Rich (Illinois State University), who is taking over for Mike Willenborg the remainder of this year and continuing as chair during 2005-2006 as well. Mike served as liaison to the PAC during the inaugural PAC-sponsored research program (discussed elsewhere in this report) and we appreciate his service and wish him well in his new editorial responsibilities. All of these committees have been actively involved in a variety of initiatives, and I encourage you to read the reports that are posted on our web site to see how these groups work to fulfill the mission of the Section. Our Auditing Standards and Research Committees are presently working with Gary Holstrum at the PCAOB to explore ways in which we can help the PCAOB in the standard-setting process. Julia Higgs (Florida Atlantic University), chair of the Membership and Regional Coordinators Committee, has worked on initiatives to increase membership numbers as the Section and AAA continue to experience declines in numbers overall. We are pleased to announce that the Executive Committee approved the granting of free one-year memberships to faculty who expressed an interest in auditing education but had not joined the Section. Julia's efforts resulted in 54 new members. We are certain that if these folks attended the recent MYC, they will join for a second year. We also continue to offer memberships to all Doctoral Consortium attendees. Finally, the section is working with E&Y and the AAA on ways to increase student enrollments in PhD programs—particularly those with an auditing interest. Those of you who are directors of PhD programs may wish to look for announcements on the AAA web site. Also, the section will keep you informed as we have more information.

I would appreciate your attention to one of the initiatives undertaken by the Education Committee. Eric Johnson (IUPUI), as chair of this committee, is surveying members regarding the demand for an on-line journal with a focus on teaching and practice. Thus far, about 82 percent of those responding are in favor of establishing the journal. However, we would like a greater number of respondents prior to moving forward on this initiative. If you have an interest in a timely outlet for educational materials, please contact Eric. He would appreciate your input.

Next, I want to remind you of our upcoming meetings. This year's AAA Annual Meeting will be held in San Francisco, CA on August 7-10. Bryan Church (Georgia Tech), the Auditing Section's liaison to the AAA Annual Meeting Planning Committee, reports that submissions are up from last year. Approximately half of the submissions are archival papers, reflecting an increase in available audit fee and corporate governance data. In addition, AAA President and Auditing Section member Jane Mutchler (Georgia State University) has created a new forum — the New Scholar Concurrent Sessions — for this year's annual meeting. The purpose of these sessions is to promote the development of new scholars, members who received their Ph.D. since 2002. There should be an excellent program for Auditing Section members in San Francisco, and we hope the Section will be well-represented. Be sure to mark your calendars for the Section's usual Monday lunch.

As I am writing this report, we do not yet have a specific location for our 2006 MYC. We do know that the dates for our meeting will be January 12-14, 2006 and we will be in sunny Southern California. We are holding a combined meeting with limited overlap (about one-half day) with the International Section and are planning at least one joint reception. The planning of this meeting will go forward under the leadership of our Conference program chairs, Mark DeFond (University of Southern California) and Todd DeZoort (University of Alabama). They will send out information and a call for papers as soon as we have a confirmed location.

Finally, as reported last year by Jean Bedard, there were two items under discussion at the Practice Advisory Council (PAC), a research initiative involving PAC sponsorship of research on specific topics of importance to the profession and an education initiative involving close interaction with academics to develop education-oriented events for meetings and educational materials. We are pleased to report that the PAC Research Initiative Task Force, chaired by John Fogarty, selected one proposal for sponsorship. Congratulations to Vicky Hoffman (University of Pittsburgh) and Mark Zimbelman (BYU). We are also pleased to report that KMPG has agreed to sponsor a second research proposal. Congratulations to Jennifer Joe (Georgia State University) and Christine Earley (University of Connecticut). Jean has prepared a more detailed reporting of the process and the supported research elsewhere in the Auditors' Report. Please see the announcement entitled "Practice Advisory Council Research Initiative Decisions."

In closing, I extend my sincere thanks to the members of all of the Section committees for their diligence in performing all the tasks necessary to achieving the Section's goals. It is an honor to work with you all. I also have had the privilege of being directly involved in the two 25th Anniversary MYC commemorations related to our Section — the 25th Anniversary of the Section itself and now the 25th Anniversary of AJPT, celebrated in Houston, TX and New Orleans, LA, respectively). As coined by Steve Salterio, I believe this duly qualifies me as one of the "dinosaurs." Yes, you probably had to be there....