Management’s Discussion and Analysis: Implications for Audit Practice and Research

SUMMARY: The quality of disclosures provided in the Management’s Discussion and Analysis (MD&A) is a subject of continuing concern on the part of regulators. Furthermore, a variety of regulatory bodies have recently initiated discussion on the extent to which the auditor should be involved with MD&A disclosures. Academic research yields information about explicit and implicit information that may be useful to the auditor in boosting both the quality of disclosures and the quality of the audit. Taking advantage of this potential reciprocal interaction between disclosure quality and audit quality may forestall the need for additional regulatory action, thus conferring benefits upon both practitioners and the investing public.