（2008）Management’s Discussion and Analysis：Implications for Audit Practice and Research.pdfVIP

Current Issues in Auditing American Accounting Association Volume 2, Issue 2 DOI: 10.2308/ciia.2008.2.2.A26 2008 Pages A26–A35 Management’s Discussion and Analysis: Implications for Audit Practice and Research Jeffrey R. Cohen, Lisa Milici Gaynor, Lori L. Holder-Webb, and Norma Montague SUMMARY: The quality of disclosures provided in the Management’s Discussion and Analysis MDA 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 MDA 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 recip- rocal interaction between disclosure quality and audit quality may forestall the need for additional regulatory action, thus conferring benefits upon both practitioners and the invest- ing public. INTRODUCTION The stated purpose of Management’s Discussion and Analysis of Financial Condition and Results of Operations MDA is to provide an “insider’s view” of a publicly-traded company’s financial performance. According to the Securities and Exchange Commission SEC 2003a, MDA should offer a “discussion and analysis of a company’s business as seen through the eyes of those who manage the business.” A continuing key concern for regulators and stakeholders is whether management’s communication is complete, comprehensive, and free from bias; this con- cern has been repeatedly addressed by the SEC in authoritative pronouncements offering clari- fication