ACCOUNTING, AUDITING, AND FINANCIAL REPORTING.

• Author: Kinnersley, Randall L.
• Position: Brief Article

The Readability of Government's Letter of Transmittal Relative to Public Company Management's Discussion and Analysis

Kinnersley, Randall L. and Fleischman, Gary M.

Journal of Public Budgeting, Accounting, & Financial Management, Spring 2001, pp. 1-22.

One of the purposes of financial reporting is to facilitate the decision making of financial report users. To effectively use the information in annual financial reports, however, users have to be able to understand them. To further such understanding, annual reports include written explanations of financial information referred to in the public sector as the letter of transmittal and in the private sector as management's discussion and analysis (MD&A). Although the intent of these two documents is the same, the users can be quite different. Private companies generally expect users to have a reasonable understanding of business and finance, while public entities must communicate with a much more diverse audience that includes citizens with little knowledge of financial matters. In this article, the author presents the results of a study to determine the readability of letters of transmittal relative to management's discussion and analysis. Using five Mann-Whitney tests...