Examining the Readability of Critical Audit Matters (and what it suggests to Educators)

Abstract

This paper identifies clear writing techniques that we as educators can encourage our students to improve/apply early on their career path. Specifically, this paper investigates the utilization of certain clear writing techniques recommended by the SEC - and what the findings suggest for accounting educators. We develop a checklist of SEC recommended clear writing techniques and then manually review a sample of 84 CAM narratives (50 auditor reports). For additional insight, we calculate the StyleWriter’s BOG readability index for 84 CAMs and then benchmark against management’s critical accounting estimates/policy 10-K disclosures. Findings include the underutilization of: subheadings, bulleted lists, and shorter sentences. In addition, the CAMs scored 10% lower on readability than management’s critical accounting estimates/policy 10_k disclosures. This paper also offers a supplemental study relating to the use of bulleted lists and finds an estimated potential improvement to readability of 22%.