MS Office, or at least Word and PowerPoint have lacked innovation to the user experience on a fundamental level. Years ago they overhauled the UI because people weren't using many of the features on offer. What they failed to do is make those features easy to use. Prime example is numbered lists in Word which is still unnecessarily complicated to use. This isn't a compatibility issue, purely UX. Numbered lists are also buggy, like they were 15 years ago, and are still the best way to corrupt your document.
It's not just lists, just about all word's auto formatting is buggy and unintuitive. Page numbers, tables, headings, tables of contents, paragraph layout on pages with pictures, just putting pictures in a document can be a pain in and of itself. Pretty much anything you do in word above some simple formatting starts to get buggy and unpredictable and the more of these things you have in a document, the more painful editing that document becomes.
The problem for microsoft, it's not a simply "fixing the auto formatting", but "changing how auto formatting behave". Nowadays the buggy auto formatting may be expected by some people and changing (fixing) it may distrupt their workflow (xkcd reference).
Moreover I don't think there are "best" specification for those auto formatter, even a "better" one.
