MD&A Textual Similarity and Auditors
Auditing: A Journal of Practice & Theory 39 (3): 79–96. https://doi.org/10.2308/ajpt-52790
55 Pages Posted: 15 Jan 2014 Last revised: 26 Jun 2020
Date Written: Feb 13, 2020
This study examines the relation between auditors and the unaudited Management Discussion and Analysis (MD&A). We show that MD&As are more textually similar when firms share the same auditor. This result suggests that auditors influence MD&As to be more textually similar merely by reviewing the MD&A. We next show that auditor-related MD&A similarity is positively associated with MD&A readability and that the market reacts to auditor-related MDA modifications. These results provide modest evidence that auditor-related MD&A similarity may improve the MD&A’s disclosure quality, consistent with the general idea that more audit influence is a positive financial reporting characteristic.
Keywords: MD&A; disclosure quality; textual similarity; auditors
JEL Classification: M49
Suggested Citation: Suggested Citation