Determinants of the Readability of SOX 404 Reports

This study examines SOX 404 reports with fiscal year-ends between 2004 and 2014 to determine their readability as measured by the FOG Index. We investigate the association between readability and company characteristics, auditor type, opinion type, time period, report content, and report length. We find that the sign and significance of certain associations depend on whether the reports contain material weaknesses. Overall, results show that management's reports are more readable than auditor's reports; longer reports are more readable—contrary to findings for other corporate communications such as 10-Ks; reports of Big 6 firms are less readable than non-Big 6 reports. Interestingly, the Big 4 firms differed in the readability of their reports