E&Y CARAT NEWS BRIEFS

Ernst & Young Center for Auditing Research and Advanced Technology (E&Y CARAT)

DIRECTOR'S NOTE

Also, Professor Theodore J. Mock, Arthur Andersen Alumni Professor at the University of Southern California, and Professor Arnold Wright, Arthur Andersen Professor at Boston, the other E&Y Distinguished Visiting Scholars of the Center were here in November, and worked with me on several projects on auditors' decision-making behavior.

The E&Y CARAT co-sponsors two research workshops held on each Friday. The Management Science and Auditing Seminar is co-sponsored with the Ron Harper AI Lab, and the Accounting and Finance Workshop is co-sponsored with the AIS Division. The main purpose of these seminars is to share the research findings of the speaker with the seminar participants and to provide a forum for the exchange of ideas.

We have had the following distinguished speakers this semester: Professor Rashad Abdel-khalik, Graduate Research Professor at the University of Florida, Professor William E. McCarthy, Arthur Andersen Alumni Professor at Michigan State University, Professor William M. Cready, KPMG Peat Marwick Professor at Texas A&M University.

Please see our new web site at http://lark.cc.ukans.edu/~srivasta/ We are developing the website as a resource center for accounting and auditing professionals. If you are looking for information on professional

organizations, CPA Exam requirements for various states in the US, or for faculty and their home-pages, check under RESOURCE; for a specific company's financial and non-financial information, check under TEACHING, our FRAANK system, or other linkages

such as PWC-Edgarscan; for digital analysis to determine data abnormality due to fraud or Y2K problems, again check under TEACHING. Please sign

Rajendra P. Srivastava, Ernst & Young Professor and Director, The Ernst & Young CARAT

our guest-book and send email messages with your comments on site improvements.

We have had a successful semester at the E&Y CARAT and are excited about the future opportunities. I sincerely thank the "E&Y family" for their generous financial support and moral encouragement. In particular, I want to acknowledge the support of Jim Searing, Ellen Glazerman, Bill Taylor, and John Wilgers of Ernst & Young, LLP.

Holiday greetings!

We started the fall semester by awarding five Ernst & Young Students Fellowships, four at the undergraduate and MS/MBA levels, and one PhD. Each student fellow is assigned to a faculty member who serves as a mentor for the student and, in return, is helped in his/her research and teaching from the student. We are all very pleased with this program.

The student fellow works closely with a faculty mentor and learns about teaching and research activities. I would like to express my sincere thanks to the "Ernst & Young family" for making this possible. This last year has been a very special year. Direct contributions to the scholarship fund from our donors allowed us to free some funds from E&Y CARAT to up-grade computer equipment in the Center.

A new member, Professor Jean Bedard, has joined the pool of Ernst & Yong Distinguished Visiting Scholars. Professor Bedard visited the Center from September 8-12, 1999. Several of us benefited from her visit. In particular, Professor Mike Ettredge co-authored an article entitled "The Role of Competitive Bidding in the Market for Initial Attest Engagements," with Prof. Bedard. "I owe my participation in this project to the E&Y Center," he says.

Ernst & Young Center for Auditing Research and Advanced Technology (E&Y CARAT)

Division of Accounting and Information Systems, School of Business

The University of Kansas, Lawrence, KS 66045

Winter 1999

E&Y CARAT NEWS BRIEFS

NEW MEMBER JOINS E&Y DISTINGUISHED VISITING SCHOLARS

Contemporary Accounting Research and is on the editorial board of The Accounting Review. She is a member of the American Accounting Association and serves on the steering committee of the Association's Northeast Region.

University of Kansas. Professor Vernon Richardson is her mentor. Together they are collecting information regarding the time period between SEC 10K filings and when companies actually update their web pages. This research will be used to evaluate the timeliness of financial information on the Internet.

Meredith Zepetella: Meredith Zepetella is currently pursuing an undergraduate degree in Accounting. She plans to enter the Master's of Accounting and Information Systems program in January 1999. Meredith is working with Professor Rajendra Srivastava and PhD student Matt Bovee on the FRAANK (Financial Reporting and Auditing Agent with Net Knowledge) Project. She is doing programming in Perl 5 for this project.

Lakshmy Sivaratnam: Lakshmy Sivaratnam is a PhD student in the accounting and information systems area. She is working with Professor Rajendra P. Srivastava along with another Ph.D. student, Lili Sun, on developing models for predicting financial health of companies. These models are to be used in continuous on-line auditing. She is also responsible for maintaining and updating the E&Y CARAT home page.

Professor Jean Bedard is the Center's newest visiting scholar. She is the Joseph M. Golemme Research Professor of Accounting at Northeastern University, Boston. Professor Bedard

E&Y STUDENT

SCHOLARS AND E&Y FACULTY MENTORS

holds an AB from Brown University, MS and MPA degrees from the University of Cincinnati, and MSB and PhD degrees from the University of Wisconsin-Madison. She is a Certified Public Accountant (Wisconsin). Professor Bedard served as associate professor and

Based on the academic achievements and faculty recommendations, the following students were selected for the Ernst & Young Student Fellowships:

Janice McClelland: Janice McClelland is currently enrolled in the MBA program but preparing to enter a doctorate program the next fall. She received her MAIS from KU in December 1997 and has worked for Deloitte & Touche as a staff tax accountant. She is currently teaching two sections of BUS 241. She is working with Professor Allen Ford to gain experience to help her prepare for a career as a tax educator.

Molly Yu: Molly Yu is currently enrolled in MAIS. She is working with Professor Mike Ettredge, helping him in his research and teaching.

Michelle Brost: Michelle Brost is presently enrolled in the Master of Accounting and Information System's program at the

Arthur Andersen Faculty Fellow at the University of Connecticut prior to joining the College of Business Administration faculty. Her current research interests focus on how decision quality is affected by ways in which accounting information is acquired and used, particularly in the contexts of auditing and lending. She has published in such journals as Management Science, The Accounting Review, Auditing: A Journal of Practice and Theory, Contemporary Accounting Research, and Research in Governmental and Nonprofit Accounting. Professor Bedard is currently an associate editor of

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E&Y CARAT NEWS BRIEFS

PRODUCTIVE RESEARCH EFFORTS AT THE E&Y CARAT

M. Ettredge, V. Richardson and S. Scholz, "Tailor-Made: Meeting the Information Needs of Retail Investors and Analysts," Investor Relations Quarterly, Volume 2, No. 4 (Summer 1999).

M. Ettredge, V. Richardson and S. Scholz, "Accounting Information at Corporate Web Sites: Does the Auditor's Opinion Matter?" under second review, Research in Accounting Regulation.

M. Ettredge, V. Richardson and S. Scholz, "Determinants of Voluntary Dissemination of Financial Data at Corporate Web Sites," submitted to the International Journal of Intelligent Systems in Accounting, Finance and Management.

M. Ettredge, V. Richardson and S. Scholz, "An Emerging Model of Web Site Design for Corporate Disclosure: Targeting Information Clienteles," submitted to Communications of the ACM.

Gillett, P., and R. P. Srivastava, "Integrating Statistical and Non-Statistical Audit Evidence Using Belief Functions: A Case of Attribute Sampling," Auditing: A Journal of Practice and Theory (forthcoming).

Kogan, A., Nelson, K. M., R. P. Srivastava, M. A. Vasarhelyi, and H. Lu, "Design and Applications of an Intelligent Financial Reporting and Auditing Agent with Net Knowledge (FRAANK)."

Along with the active participation of the visiting scholars in our research, the student fellowship and faculty mentorship programs have contributed significantly to the research mission of the School. The following is more evidence of this success.

E. Black, T. Carnes and V. Richardson, "The Market Valuation of Firm Reputation," Corporate Reputation Review, conditional acceptance (pending minor revisions).

M. Ettredge, V. Richardson, and S. Scholz, "The Presentation of Financial Information at Corporate Web Sites," Presented at the 1999 American Accounting Association National Meeting. This paper is under second review at the Journal of Information Systems.

M. Ettredge, "Electronic Financial Disclosure," panel discussion at the 1999 American Accounting Association National Meeting.

M. Ettredge, J. C. Bedard and K. Johnstone, "The Role of Competitive Bidding in the Market for Initial Attest Engagements," submitted to the Journal of Accounting Research.

M. Ettredge,V. Richardson and S. Scholz, "Going Concern Auditor Reports at Corporate Web Sites: A Regulatory Loophole?," under review at Research in Accounting Regulation.

Dean Tom Sarowski, AIS Director Jim Heintz, and Bill Taylor of Ernst & Young.

Lu, H., and R. P. Srivastava, "Working Paper Review Process: A Theoretical Model And Simulation," accepted for presentation at the Mid-Year Auditing Section Meeting, Los Angeles, January 13-15, 2000.

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E&Y CARAT NEWS BRIEFS

Mock, T., A. Wright, R. Srivastava, and H. LU, "The Framing, Evaluation and Modeling of Multiple Hypotheses in Auditing," at the International Symposium on Auditing research, Los Angeles, June 1999.

American Business Law Journal, Summer, 1999, Volume 36, Issue 4 (Recipient of Hoeber Best Paper Award).

R. Prentice, V. Richardson and S. Scholz, "Caught in the Web: Managing Financial Disclosure Risk at Corporate Web Sites,"

Srivastava, R. P., T. Mock, and A. Wright, "A General Framework for Causal Reasoning of Multiple Hypotheses," working paper, School of Business, University of Kansas.

MANAGEMENT

SCIENCE AND TECHNOLOGY SEMINAR

The Financial Executive, September/October 1999.

V. Richardson and S. Scholz, "Corporate Reporting and the Internet: Vision, Reality and Intervening Obstacles," Pacific Accounting Review (Millennial Edition), Vol. 11 No. 2 Dec 1999/Jan 2000.

Fridays 10:30a.m. _ 12:00 noon, 428 Summerfield Hall

8/27, Prakash P. Shenoy, Ronald G. Harper Distinguished Professor of Artificial Intelligence, University of Kansas, "Conditional Independence: Definitions, Semantics, and Properties".

9/3, Steve Hillmer, Professor, University of Kansas, "Bayesian Statistics I".

9/10, Steve Hillmer, Professor, University of Kansas, "Bayesian Statistics II".

9/17, Steve Hillmer, Professor, University of Kansas, "Bayesian Statistics III".

9/24, Catherine Shenoy, Assistant Professor, University of Kansas, "Comparing Regression and Bayesian Networks".

10/8, Phan H. Giang, PhD Student, Business School, University of Kansas, "Arrow's

Nelson, K., A. Kogan, R. P. Srivastava, M. Vasarhely, and H. Lu, "Virtual Auditing Agents: The EDGAR Agent Challenge" Decision Support System (forthcoming).

R. Prentice, V. Richardson and S. Scholz, "Rule 10b-5 and Corporate Internet Disclosures: An Empirical Evaluation,"

V. Richardson and S. Scholz, "Practicing Safe Web," Investor Relations Quarterly, Volume 2, No. 3 (Winter 1999).

Srivastava, R. P. and T. J. Mock, "Evidential Reasoning for WebTrust Assurance Services," Journal of Management Information Systems (forthcoming).

Srivastava, R. P., A. Wright, and T. Mock, "Multiple Hypotheses Evaluation in Accounting: A Normative Framework" working paper, School of Business, University of Kansas.

Please visit our home page:

http://lark.cc.ukans.edu/~srivasta/.

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E&Y CARAT NEWS BRIEFS

Impossibility Theorem and Possibilistic Fusion".

10/15, Philippe Smets, Professor, Free University of Brussels, "The Transferable Belief Model for Discriminant Analysis".

10/22, Bozenna Pasik-Duncan, Professor, Mathematics Dept. University of Kansas, "On Stochastic Adaptive Control and Financial Mathematics".

10/29, Da-Hsiang Don Lien, University of Kansas, "Production and Hedging under Knightian Uncertainty".

11/5, John M. Charnes, Associate Professor, University of Kansas, "Using Real-Options Valuation Methods for a Biotechnology Firm".

11/12, William E. McCarthy, Arthur Andersen Alumni Professor, Michigan State, Resource, "Enterprise and Agents Modeling".

11/19, Rajendra Srivastava, Ernst & Young Distinguished Professor, University of Kansas, "Computational Modeling in Audit Decision Making".

12/3, Prakash P. Shenoy, Ronald G. Harper Distinguished Professor of Artificial Intelligence, University of Kansas, "Sequential Valuation Networks: A New Method for Representing and Solving Asymmetric Decision Problems".

9/24, Professor Sanjay Baghat, University of Colorado - Boulder, "Corporate Governance".

10/1, Professor Kehn Lehn, University of Pittsburg, Executive Compensation in Family Firms".

10/8, Professors M. Ettredge, V. Richardson, and S. Scholz, University of Kansas, "Financial Data at Corporate Web Sites: Does User Sophistication Matter?"

10/15, Professor Paul D. Koch, University of Kansas, "Are Calendar Spreads Less Risky than Outright Futures Positions?"

ACCOUNTING AND FINANCE WORKSHOP

Fall 1999: Friday, 1:30 - 3:20 P.M., 502 Summerfield

8/27, Professors M. Ettredge, V. Richardson, and E. Black, "Investor Sophistication and the Reaction to Earnings Announcements: The Case of IPOs".

9/3, Associate Professor Kissan Joseph, University of Kansas, "On the Optimality of Delegating Pricing Authority to the Salesforce".

9/10, Professor Jean C. Bedard, Joseph M. Golemme Research Professor of Accounting, Northeastern University, Boston, "Engagement Planning, Bid Pricing, and Client Response:

Professor Raj Srivastava, E&Y's Ellen Glazerman, and

Professor Allen Ford

The Effects of Risk and Market Context in Initial Attest Engagements".

10/29, Professor Rashad Abdel-khalik, Graduate Research Professor, University of Florida, "Incentive Compensa

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E&Y CARAT NEWS BRIEFS

tion and Valuation of Managerial Skill".

Ted Mock, Arnold Wright, and Raj Srivastava

11/12, Professor William E. McCarthy, Arthur Andersen Alumni Professor, Michigan State University, "Enterprise and Agents Modeling".

11/19, Professor William M. Cready, Texas A&M University, College Station, Texas

12/3, Professor Murali Jagannathan, University of Missouri, "The Operating Performance of Firms Repurchasing Shares".

And Happy New Year!

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