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Access the SEC's Plain English Handbook and identify six principles of clear writing identified in Chapter 6. How do you think these six principles are of benefit to practicing accountants?How could the SEC mandate companies to follow these six principles?Do you think companies sometimes elect not to follow these principles to partially disguise poor operating results? Why, or why not? Weirich, T. R., Pearson, T. C., & Churyk, N. T. (2020). Accounting and auditing research, tools, and strategies (10th ed.). Wiley. Do the discussion the response each posted below. Posted 1 The six principles of clear writing listed in the SEC’s Plain English Handbook are using active voice and strong verbs, using personal pronouns, using concrete terms instead of abstractions, omitting unnecessary words, using positive terms instead of negatives, and using short sentences (Office of Investor Education and Assistance, 1998). How do you think these six principles are of benefit to practicing accountants? These principles are beneficial because they make practicing accountants’ writing easier to understand for those who do not have a background in accounting. Specifically, using concrete terms instead of abstractions, or even jargon, helps readers understand the document with ease. Also long, wordy sentences; sentences that use the passive voice; and sentences with multiple negatives are difficult to read and comprehend. They often require the reader to reread the sentence several times before they understand what the writer is trying to convey. By eliminating these problems, accountants can make it easier for clients to understand what they are communicating, respond, and take any necessary actions. How could the SEC mandate companies to follow these six principles? The SEC could mandate companies to follow these principles by returning any documents that have been submitted for approval that do not follow the principles and requesting that they be rewritten. This would require them to reject the documents until they are writing in plain English. Do you think companies sometimes elect not to follow these principles to partially disguise poor operating results? Why, or why not? I do think that some companies choose not to follow these principles to disguise poor operating results. By using long, convoluted sentences; abstract, technical words; and double negatives, they can discourage a reader from trying to understand or pay attention to what their documents say. This still allows the company to claim that they disclosed the information. References Office of Investor Education and Assistance (1998). A Plain English Handbook. U.S. Securities and Exchange Commission. Retrieved from https://www.sec.gov/pdf/handbook.pdf Posted 2 The Plain English Handbook (SEC, 1998) demonstrates how to construct clearer and more useful disclosure documents by employing well-established approaches for writing in plain English. The manual provides six principles to follow to ensure clear writing listed below; Utilize strong verbs in the active voicePersonal pronoun useAvoid abstractionsDo not use superfluous wordsPositive writingUtilize short sentences How do you think these six principles are of benefit to practicing accountants? Utilizing the six principles listed above ensures the documents they distribute are easy to understand by their audience. Many times the readers of those documents are not accounting professionals and if they use too many complex words, the reader may not be able to understand. Warren Buffet discussed in the preface that he studied documents from public companies and he stated “I’ve been unable to decipher just what is being said or, worse yet, had to conclude that nothing was being said” (SEC, 1998). Practicing accountants that use clear language provide a level of transparency with their audience. This allows companies, BOD members, consumers be able to understand and comprehend the data or reports being distributed. Investors will be better able to comprehend what they are purchasing and make educated decisions about whether to keep or sell their assets. If brokers and financial advisors can read and comprehend these papers quickly and readily, they can make better suggestions to their customers. How could the SEC mandate companies to follow these six principles? On October 13, 2010, the Plain Writing Act of 2010 was signed into law. Federal agencies must employ clear government communication that the public can understand and use, according to the law (Plainlanguage, 2010). The SEC provides guidelines on how the documents can be prepared. Much like we do in our classes, there is always a certain type of font or format accepted. The same could be outlined for companies. Within this handbook they instructed the readers to “read Securities Act Release No. 33-7497 (January 28, 1998) for information on plain English principles” (SEC, 1998). In 1998, The Securities and Exchange Commission (SEC) passed a regulation requiring the use of plain English in certain portions of prospectuses (SEC, 1998). Do you think companies sometimes elect not to follow these principles to partially disguise poor operating results? Why, or why not? I think the majority of companies do not elect to follow these principles with ill intent. There is a process to elect the principles but smaller companies may not have the ability to have multiple people review a document or be able send the accountant to training on how to write clearer. However, I do believe that some companies could choose not to elect the principles in order to hide poor results. The more jargon they use the harder it would be to follow and understand. Readers will lose interest if they cannot engage with the document and may overlook a bad result. References plainlanguage.gov | Law and requirements. (2011). Plainlanguage.gov. https://www.plainlanguage.gov/law/ SEC.gov | Plain Writing Initiative. (n.d.). Www.sec.gov. https://www.sec.gov/plainwriting.shtml US Securities and Exchange Commission. (1998). A Plain English Handbook How to create clear SEC disclosure documents. https://www.sec.gov/pdf/handbook.pdf Posted 3 Below are the six principles of note found in the SEC’s Plain English Handbook along with a brief description of how they benefit practicing accountants: Use the active voice with strong verbs – makes things short and clear. An example of an active voice is, “the man bought the snack” whereas the passive voice sounds like “the snack was bought by the man.”Use personal pronouns – this aids in the reader’s comprehension and allows the writer to more easily “speak” to them. This is also contrary to many formal writing principles.Bring abstractions down to earth – this makes complex terminology such as mutual funds, zero coupon bonds and so on far more comprehensive and involves using simple examples.Omit superfluous words – The fewer words, the better. For example, instead of saying “because of this reason,” simply say “because.”Write in the positive – The concept of simplification applies to many of these. In this case, positive writing means avoiding negatives. For example, saying “unqualified people will not get something” is far more confusing than simply saying “qualified people will get something.”Use short sentences – A sentence becomes more confusing the longer it gets. Rather than leaving investors confused by overly packed statements, writers should focus on simplification and separation of ideas and concepts. With all of this said, the course text further confirms the overall importance of comprehension as well, stating, “comprehension converts, defends, distinguishes, estimates, extends, explains, predicts, etc.” (p. 25). This simple idea surely is not easily enforced quantitatively. For example, if the SEC set a character count on earnings reports, investors might be frustrated by the lack of present information. Alternatively, whatever company tasked with reporting their earnings, could effectively disguise poor operating results via excruciatingly long reports and incomprehensive jargon. However, many companies would prefer to efficiently communicate with people as this will likely breed greater future investment. It seems likely that while the SEC may have difficulty enforcing the principles of clear writing, the natural consequences accompanying utilizing it or not will largely follow suit. In other words, unnecessarily long reports naturally do not instill confidence in a company. Alternatively, clear reports do, leading to greater investment and prosperity for those communicating more simply. If an investor cannot comprehend a company’s financial reports, they should not invest in it. References A plain English handbook - SEC. (n.d.). Retrieved January 12, 2022, from https://www.sec.gov/pdf/handbook.pdf Weirich, T. R., Pearson, T. C., & Churyk, N. T. (2021). Accounting & auditing research: Tools & strategies. Wiley.