Check Spelling Settings (Auto spell Check)
Check Spelling Settings is missing in Preferences dialog. Auto correct showing wrong spellings.
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vote
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What other settings do you need though?
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John, the spellcheck follows the language set in the Character panel. If the language doesn't match the one used in text, all words would be treated as mistakes. Make sure these match, but don’t hold your breath — Spellcheck is pretty broken in Ai: http://illustrator.uservoice.com/forums/601447/suggestions/49505702