Report of the President

I continue to enjoy the privilege of serving as the Auditing Section's President for 2005-2006. What a pleasure it is for me to work with so many of the members of our Section and the broader accounting profession community. Thank you for the wonderful opportunity to serve in this capacity. The Auditing Section has much to be proud of and it is important for all of you to be aware of what our Section is doing. Let me provide you a brief overview of some of our recent activities.

2006 Mid-Year Conference
We could not have had a more exciting 2006 Auditing Section Mid-Year Conference, which was held January 13-14, 2006 at the Hilton-Universal Studios in Los Angeles, California. Our format was a bit different this year as we experimented with hosting our meeting jointly with the AAA International Section. From all accounts from the over 370 attendees, it was a huge success! While we combined our plenary sessions, the joint meeting allowed us to provide additional concurrent sessions whereby Auditing Section and International Section members could attend any concurrent session of their choice. This event provided an excellent opportunity for members of both sections to interact and dialogue about important issues related to the global audit profession.

The timing for a joint meeting with the International Section could not have been better. Given the rapid pace of standards setting, particularly at the international level, we are seeing first-hand the rapid "globalization" of issues affecting the accounting profession. Thus, our focus on international developments in auditing was extremely relevant. We were fortunate to open our meeting with three plenary speakers who are heavily involved in standards-setting at the international level. Jim Sylph, who serves as Technical Director of the International Federation of Accountants (IFAC), served as moderator. Jim provided insights about changes happening internationally based on his work with IFAC, in addition to his instrumental work in securing our two other speakers. David Brown, former chair of the Ontario Securities Commission and current member of the International Public Interest Oversight Board (IPIOB), provided an excellent overview of the mission and initial activities of this newly formed public interest oversight group. John Kellas, Chairman of the International Auditing and Assurance Standards Board (IAASB), followed David with an overview of current standards-setting initiatives at the IAASB level, including recent developments resulting from the European Commission's 8^th Directive that further embraces IAASB standards. All three speakers were excellent — what a great kickoff they provided for our joint conference.

After literally "walking the red carpet" inside Universal Studios to enjoy our movie-themed reception Friday night, we began our Saturday activities with a plenary session featuring Brad Oltmanns, who serves as partner on PricewaterhouseCoopers, LLP's Academy Awards Balloting engagement. Brad's overview of the incredibly secretive process of counting the ballots of nominees for Academy Awards that occurs in January and the firm's subsequent count of ballots for the award winners who are announced in March was quite exciting. We all quickly got the sense that, while it would be quite fun to be part of this engagement team, the pressure associated with the need for accuracy and secrecy is intense as they work towards the live telecast of the Academy Awards Ceremony - the second most watched television show behind the NFL Super Bowl. As the Academy Award nominees for 2006 were revealed January 31, 2006, it was fun to know a lot about the process that Brad and his engagement team had just completed. I look forward to watching the Academy Awards show in March, knowing that Brad and one of his partners will be back stage with the winning envelopes in hand!

We all owe a huge debt of gratitude to our 2006 Mid-Year Conference Planning Co-Coordinators — Mark DeFond and Todd DeZoort. They went well beyond the call of duty as they coordinated the packed conference agenda that featured 16 concurrent sessions, four invited panel sessions, and our research roundtable forum papers. Todd and Mark were assisted by Karla Johnstone and Terry Neal, who will serve as our 2007 Mid-Year Conference Co-Coordinators. Thanks to many of you who served as moderator, discussant, or reviewer. And, we are indebted to the great AAA staff, including Dee Strahan and her on-site team, for their incredible assistance. It really takes a team effort to pull this conference 0ff — well done!

The Auditing Section is especially grateful to the KPMG Foundation for their continued generous support of our Mid-Year Conference. Thankfully, we were able to publicly express our appreciation to Bernie Milano and Eddie Munson, who were among the KPMG representatives at the conference. Please be sure to thank others with the firm for the support the KPMG Foundation provides.

Auditing Section Doctoral Consortium
Fifty current PhD students from programs around the globe were treated with an awesome Auditing Doctoral Consortium that was held on Thursday, January 12, 2006. Karl Hackenbrack served as the program coordinator for our 7^th Annual Auditing Doctoral Consortium. He assembled an impressive line-up of speakers and panelists for this all-day event for current doctoral students.

The purpose of the Consortium is to stimulate students' research by exposing them to the latest ideas and thoughts from leading researchers in auditing, and by providing opportunities for networking with other Ph.D. students interested in auditing, established auditing researchers, and journal editors. Karl far exceeded our expectations for this event and more than achieved our desired goals for this event. Jane Kennedy, who will coordinate the 2007 Auditing Doctoral Consortium, assisted Karl by coordinating an exciting Editor's panel that provided the ending capstone to the day. Again, we are grateful for the generous support from the KPMG Foundation, which also supports our Consortium.

Section Awards Announced
One of the exciting activities of our Section is the award recognition for the tremendous accomplishments and dedicated service of many of our Section members. We are fortunate to have so many outstanding individuals who participate in numerous activities of our Section whether through research, education, or service. Thankfully, we take the time annually to recognize some of you.

During our two luncheons at the Mid-Year Conference, we highlighted our award winners for their work. At Friday's luncheon, we recognized two outstanding individuals for their service. Bill Felix was awarded the 2006 Distinguished Service Award and Jane Mutchler was awarded the 2006 Outstanding Auditing Educator Award. As we all know, these two individuals have served in numerous capacities not only for our Section, but also at the AAA level and beyond. They provide two excellent role models for all of us to follow and we are proud to be able to recognize them with these awards.

On Saturday, we announced three additional award winners. Mark DeFond and K.R. Subramanyam were on hand to receive the 2006 Notable Contributions to the Auditing Literature Award for their paper also co-authored with Jim Jiambalvo and Connie Becker titled, "The Effects of Audit Quality on Earnings Management," which appeared in Contemporary Accounting Research in 1998. Tina Carpenter received the 2006 Auditing Section Outstanding Dissertation Award for her dissertation titled, "Partner Influence, Team Brainstorming, and Fraud Risk Assessment: Some Implications of SAS No. 99." Jane Reimers was also recognized for her service as Tina's dissertation chair. Finally, Cindy Durtschi was awarded the Innovation in Auditing Education Award for her case titled, "The Tallahassee BeanCounters: A Problem-Based Learning Case in Forensic Accounting," that appeared in Issues in Accounting Education in 2003.

What a privilege to recognize these individuals for their outstanding accomplishments. I am also grateful to the award selection committees who worked hard in making these selections.

Please see the Call for Award Nominations that appears later in this issue. Nominations for each award are due July 1, 2006. Be sure to nominate individuals for these important awards.

PCAOB Research Syntheses Teams Announced
The Auditing Section Executive Committee recently announced the selection of seven research teams that will be responsible for preparing academic research syntheses for the Public Company Accounting Oversight Board (PCAOB) related to these PCAOB standards-setting topics:

Teams were selected by the Executive Committee based on nomination recommendations received from the Section's Research and Auditing Standards Committees. Individuals recommended by the Research and Standards Committee were identified from the pool of nomination packages submitted to the Section's Secretary in response to the call for participants issued in August 2005.

Each team is responsible for preparing a synthesis of relevant existing academic research for the team's assigned topic for submission to the PCAOB by late spring 2006. This is an exciting opportunity for the Auditing Section to influence standards-setting activities by summarizing relevant implications from academic research for the PCAOB. Thanks to those individuals serving on each of the teams and to everyone who submitted a nomination package. We hope this will be an ongoing activity of the Section. The list of individuals serving on each of these teams can be found on the Auditing Section's web site.

To help the teams focus on issues particularly relevant to these standards-setting activities, the PCAOB is hosting all the teams for a PCAOB/AAA Conference at the PCAOB offices in Washington, DC on February 16-17, 2006. The purpose of this conference is to bring all the teams together to hear first-hand from the PCAOB Board and its staff about issues where research insights might be helpful. This is an exciting opportunity for our Section to provide relevant research insights for those involved in important standards-setting initiatives. We are especially grateful to Doug Carmichael, Gary Holstrum, and Tom Ray, all of whom work at the PCAOB, for their work in hosting this conference. Thanks also to Jane Mutchler and Linda McDaniel, who are representing the AAA and Auditing Section, respectively, with Gary and me on the conference planning committee.

If you have research (especially current working papers) specifically related to one of the above topics, please send an email to the appropriate team leader (email noted above) with relevant information to help the team obtain access to papers related to that topic area.

Officer Elections
At our Section's Annual Business Meeting, Kay Tatum, Secretary, announced the results from our officer elections that took place during fall 2005. Kay reported that Mark Peecher (University of Illinois) was elected to serve as Vice President-Academic, Julia Higgs (Florida Atlantic University) was elected to serve as Secretary, and Trevor Stewart (Partner, Deloitte LLP) was elected to serve as Vice-President-Practice. Congratulations to all three! They will assume their offices at our Auditing Section Luncheon in August 2006.

As you know, the Section now conducts the election of officers through an electronic voting process. While the number of Section members casting their vote is significantly higher than our former process of vote casting in person at the Annual Business Meeting, the Executive Committee is closely monitoring the election process to determine whether we should continue the process of placing two candidates on the ballot for each office. We are among the few AAA Sections that currently elects officers from a slate of two per office. You can best signal to the Executive Committee your support for this current system by participating in our officer election voting and by encouraging your Section friends to participate as well. We hope to see an even greater level of participation in our Fall 2006 elections (be sure to see the Call for Officer Nominations highlighted in this edition of The Auditor's Report). We would like to see a record turnout in voting this fall!

2006 Annual Meeting
We are well underway in planning Auditing Section activities at the 2006 AAA Annual Meeting to be held in Washington, DC, August 6-9, 2006. Julia Higgs, who is serving as our 2006 Annual Meeting Coordinator, and Chris Earley, who is assisting Julia, are hard at work facilitating the reviews of over 130 papers submitted for concurrent session consideration — a record number! Thanks to many of you who volunteered to review these papers, which is a huge undertaking.

When you register for the AAA Annual Meeting (see the AAA web site for details), be sure to sign up for the Auditing Section's luncheon, which will be held on Monday, August 7, 2006. We are excited that we will be hosting Jeanette Franzel, Director of Financial Management and Assurance at the U.S. Government Accountability Office (GAO). Ms. Franzel will provide an overview of numerous standards-setting initiatives ongoing at the GAO, including her role in representing the GAO in several international government auditing standards initiatives. She will provide GAO perspectives about issues related to internal controls for small businesses, among other current matters affecting the profession. What a great speaker for our Washington meeting. Be there!

New Online Journal — Still Progressing!
Over the last year or so, you have been hearing about the Section's consideration of a potential new online journal that would focus on current issues in auditing. In fact, over 100 of you participated in a survey about this potential journal during the fall of 2004. Since then, the Section's Education Committee and Executive Committee have been discussing issues about this journal's possibility. At its January 12, 2006 meeting, the Executive Committee reviewed a written proposal for this new online journal that was prepared by the Education Committee and agreed to take this proposal to the AAA for approval.

The goal of this journal is to provide a mechanism to establish an ongoing dialogue between members of the academic and practitioner communities. The focus on current auditing-related issues is a natural intersection for meaningful participation and dialogue with practitioners and academics because both groups share a common interest in improving the state of the art of the auditing profession.

The purpose of this journal is not to compete with any existing journal of the AAA, specifically Auditing: A Journal of Practice and Theory, Issues in Accounting Education, or Accounting Horizons. Rather, the mission is complimentary versus competing. The nature of articles likely to be included in this journal would more closely resemble the types of audit-focused pieces one might find in journals such as the Journal of Accountancy or other similar practice outlets. Articles will be much shorter and unlikely to contain statistical analyses.

The Executive Committee has submitted a written proposal to the AAA Publications Committee and AAA Executive Committee for review and discussion during spring 2006. We are excited about the potential this new journal offers and hope that we'll be able to announce later in the year its official launch!

Business Meeting - Section Committee Reports
I am grateful to all those individuals who are serving on Section related committees. These individuals are busy with several initiatives for the Section. We were able to hear from each of our committee representatives during the Annual Business Meeting in January.

In addition to coordinating the research syntheses projects, the Research Committee (Jay Rich, Chair) is updating the Section's Research Database through 2005 while the Standards Committee (Bob Allen, Chair) is positioning itself to respond to upcoming exposure drafts, including its December 2005 comment letter provided on COSO's internal control for small businesses exposure draft that was issued in October (view the comment letter at our Section's web site). The Education Committee (Jay Thibodeau, Chair) reported on the development of the Section sponsored online-journal focused on audit and assurance education. The Communications Committee (Brian Ballou, Chair) is exploring ways to raise the visibility of auditing research and education among business school deans through strengthened communications. In addition, they are working to identify ways to improve communications to Section members. Our Membership Committee (Chris Agoglia, Chair) is exploring creative ways to attract and retain members for the Section. We are pleased that our membership actually increased in 2005! The Practice Advisory Council (PAC) hosted a panel on post-Sarbanes-Oxley implications for practice at the 2006 Mid-Year Conference and is working towards PAC sponsored calls for research in 2006 — stay tuned!

Katherine Kadous, Treasurer, provided an overview of our Section's financial position and activities. Fortunately, the Section is in strong financial shape. This is important as the Section and AAA move into a new era of uncertain changes in costs and journal subscription revenues. Dan Simunic, AJPT Editor, provided an update of submission and acceptances for AJPT since assuming his role in summer 2005, and Jim Bierstaker, Editor of The Auditor's Report, provided an overview of new features, including the resumption of a printed version of this report. Our decision to resume a shortened print edition is in response to numerous comments from the membership for a desire to make key sections of The Auditor's Report available in a single bound print version. We would love to receive your feedback on whether you find the ease of receiving a print version beneficial. Thanks go to Dan and Jim for their significant editorial service.

2007 Mid-Year Conference
Mark your calendars for the 2007 Auditing Section Mid-Year Conference to be held January 12-13, 2007 in Charleston, South Carolina. Our meeting will be held at the Francis Marion Hotel, which is in walking distance of the historic area. You are encouraged to contribute to the program through submissions of audit-related research and education papers (including instructional cases), and special session proposals. In addition, the section needs your help in planning and conducting the conference and in providing suggestions for session topics, panels, and/or workshops. Submissions must be received by September 1, 2006, to be considered for the program. See further details announced in this issue.

Help Us Help You
As I close, I want to encourage you to help us help you by keeping us informed of relevant developments affecting the profession and the Auditing Section. We will strive to keep the Section's membership informed through our web site, which is excellently maintained by Glen Gray, Section Webmaster, and through The Auditor's Report. We will periodically keep you informed of upcoming events and important information through email — so please make sure you communicate any changes in email contact information to the staff at the AAA.

Your officers are here to serve you. Please let us know how we can help make the Auditing Section even better. Here's how you can email us:

I look forward to seeing you in Washington in August 2006. Make plans now to be there!