Md&a textual similarity and auditors

This study examines the relation between auditors and the unauditedManagement Discussion andAnalysis (MD&A). We show that MD&As are more textually similar when firms share the same auditor. This result suggests that auditors influenceMD&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 thatmore audit influence is a positive financial reporting characteristic.