diff --git a/CLAUDE.md b/CLAUDE.md
new file mode 100644
index 0000000..acc45e3
--- /dev/null
+++ b/CLAUDE.md
@@ -0,0 +1,81 @@
+# CLAUDE.md
+
+This file provides guidance to Claude Code (claude.ai/code) when working with code in this repository.
+
+## Development Commands
+
+### Code Formatting
+- **Format Lua code**: `stylua lua/` (follows configuration in `.stylua.toml`)
+- **CI formatting check**: `stylua --color always --check lua` (used in GitHub Actions)
+
+### Testing
+- Tests are located in `lua/tsc/better-messages-test.lua` and `lua/tsc/utils-test.lua`
+- Uses a simple test framework with `describe` and `it` blocks
+- Tests focus on the better-messages translation functionality and core utils functions
+
+## Recent Bug Fixes
+
+### Error Detection Issues (Fixed)
+The plugin previously failed to detect TypeScript errors that were visible when running `pnpm run typecheck` or `tsc` directly. Three root causes were identified and fixed:
+
+1. **Auto-detection override**: The default config always called `find_nearest_tsconfig()` for the project flag, overriding user configuration. Now auto-detection only occurs when no explicit project is configured.
+
+2. **ANSI color parsing**: TypeScript outputs colored text by default, but the regex parser expected plain text. Fixed by adding `--color false` flag to disable colored output.
+
+3. **Working directory mismatch**: The plugin ran from the current buffer directory instead of project root. Fixed by setting `cwd` option in `jobstart()` to the project root directory.
+
+### Enhanced Error Handling
+- Added validation to ensure tsconfig.json exists and is readable
+- Improved error messages when tsconfig is not found or invalid
+- Better feedback for configuration issues
+
+## Architecture Overview
+
+This is a Neovim plugin that provides asynchronous TypeScript type-checking using `tsc`. The plugin consists of three main modules:
+
+### Core Structure
+- `lua/tsc/init.lua` - Main plugin entry point with setup and run functions
+- `lua/tsc/utils.lua` - Utility functions for TSC binary discovery, output parsing, and quickfix list management
+- `lua/tsc/better-messages.lua` - Enhanced error message translation system
+
+### Key Components
+
+#### Main Plugin (`init.lua`)
+- Exposes `:TSC` command for manual type-checking
+- Manages asynchronous job execution with progress notifications
+- Handles configuration and watch mode functionality
+- Integrates with nvim-notify for enhanced UI notifications
+
+#### Utilities (`utils.lua`)
+- `find_tsc_bin()` - Discovers local node_modules or global TSC binary
+- `find_nearest_tsconfig()` - Locates nearest tsconfig.json file
+- `parse_flags()` - Converts configuration flags to CLI arguments
+- `parse_tsc_output()` - Parses TSC output into quickfix list format
+- `set_qflist()` - Manages quickfix list display and behavior
+
+#### Better Messages System (`better-messages.lua`)
+- Translates cryptic TypeScript error codes (e.g., TS7006) into human-readable messages
+- Uses markdown files in `better-messages/` directory (60+ error translations)
+- Supports parameter substitution using `{0}`, `{1}` placeholders
+- Strips markdown links and formatting for cleaner error display
+
+### Configuration System
+The plugin uses a flexible configuration system supporting:
+- String-based flags (backward compatibility)
+- Object-based flags with boolean, string, and function values
+- Watch mode with auto-start capabilities
+- Quickfix list behavior customization
+- Progress notification preferences
+
+### Watch Mode
+When enabled, the plugin:
+- Monitors TypeScript files for changes
+- Automatically runs type-checking on save
+- Parses incremental output differently than one-time runs
+- Can auto-start when opening TypeScript files
+
+## File Structure Notes
+- Better message templates are stored as individual markdown files named by error code (e.g., `2604.md`)
+- Each template has an "original" pattern and "better" replacement message
+- The plugin searches upward from current directory for tsconfig.json (mimics TSC behavior)
+- Binary discovery checks local node_modules first, then falls back to global TSC
\ No newline at end of file
diff --git a/README.md b/README.md
index 23648e0..0de3f73 100644
--- a/README.md
+++ b/README.md
@@ -72,7 +72,7 @@ To stop any running `:TSC` command, use the `:TSCStop` command in Neovim.
 
 ## Configuration
 
-By default, the plugin uses the default `tsc` command with the `--noEmit` flag to avoid generating output files during type-checking. It also emulates the default tsc behavior of performing a backward search from the current directory for a `tsconfig` file. The flags option can accept both a string and a table. Here's the default configuration:
+By default, the plugin uses the default `tsc` command with the `--noEmit` flag to avoid generating output files during type-checking. It automatically adds `--color false` to ensure proper error parsing (unless you explicitly set `color = true`). It performs a backward search from the current directory for a `tsconfig` file when no explicit project is configured. The flags option can accept both a string and a table. Here's the default configuration:
 
 ```lua
 {
@@ -84,14 +84,11 @@ By default, the plugin uses the default `tsc` command with the `--noEmit` flag t
   use_diagnostics = false,
   run_as_monorepo = false,
   max_tsconfig_files = 20,
-  bin_path = utils.find_tsc_bin(),
+  bin_path = nil,
   enable_progress_notifications = true,
   enable_error_notifications = true,
   flags = {
     noEmit = true,
-    project = function()
-      return utils.find_nearest_tsconfig()
-    end,
     watch = false,
   },
   hide_progress_notifications_from_history = true,
@@ -100,7 +97,11 @@ By default, the plugin uses the default `tsc` command with the `--noEmit` flag t
 }
 ```
 
-With this configuration, you can use keys for flag names and their corresponding values to enable/disable the flag (in the case of `noEmit = true`), provide a function (as in the case of the `project`) or enable watch mode. This makes the configuration more explicit and easier to read. Additionally, the flags option is backwards compatible and can accept a string value if you prefer a simpler configuration:
+With this configuration, you can use keys for flag names and their corresponding values to enable/disable the flag (in the case of `noEmit = true`), specify a custom project path (e.g., `project = "/path/to/tsconfig.json"`), or enable watch mode. This makes the configuration more explicit and easier to read. 
+
+**Note**: The plugin automatically adds `--color false` to ensure proper error parsing unless you explicitly set `color = true` in your flags.
+
+Additionally, the flags option is backwards compatible and can accept a string value if you prefer a simpler configuration:
 
 ```lua
 flags = "--noEmit",
diff --git a/lua/tsc/init.lua b/lua/tsc/init.lua
index 9e79307..67328ea 100644
--- a/lua/tsc/init.lua
+++ b/lua/tsc/init.lua
@@ -40,7 +40,6 @@ local DEFAULT_CONFIG = {
   max_tsconfig_files = 20,
   flags = {
     noEmit = true,
-    project = nil,
     watch = false,
   },
   hide_progress_notifications_from_history = true,
@@ -294,6 +293,12 @@ M.run = function()
       end
     end
 
+    -- Set working directory to project root if available
+    local project_root = utils.get_project_root(project)
+    if project_root then
+      project_opts.cwd = project_root
+    end
+
     local flags = ""
     if type(config.flags) == "string" then
       flags = config.flags
diff --git a/lua/tsc/utils-test.lua b/lua/tsc/utils-test.lua
new file mode 100644
index 0000000..404e550
--- /dev/null
+++ b/lua/tsc/utils-test.lua
@@ -0,0 +1,163 @@
+local utils = require("tsc.utils")
+
+describe("Auto-detection override fix", function()
+  it("Auto-detects project when not explicitly configured", function()
+    local flags = {
+      noEmit = true,
+      watch = false,
+    }
+
+    -- Mock find_nearest_tsconfig to return a test path
+    local original_find_nearest_tsconfig = utils.find_nearest_tsconfig
+    utils.find_nearest_tsconfig = function()
+      return { "/test/path/tsconfig.json" }
+    end
+
+    local result = utils.parse_flags(flags)
+
+    -- Restore original function
+    utils.find_nearest_tsconfig = original_find_nearest_tsconfig
+
+    assert.is_true(string.find(result, "--project /test/path/tsconfig.json") ~= nil)
+  end)
+
+  it("Does not override explicit project configuration", function()
+    local flags = {
+      noEmit = true,
+      watch = false,
+      project = "/custom/path/tsconfig.json",
+    }
+
+    local result = utils.parse_flags(flags)
+
+    assert.is_true(string.find(result, "--project /custom/path/tsconfig.json") ~= nil)
+  end)
+
+  it("Handles missing tsconfig gracefully", function()
+    local flags = {
+      noEmit = true,
+      watch = false,
+    }
+
+    -- Mock find_nearest_tsconfig to return empty array
+    local original_find_nearest_tsconfig = utils.find_nearest_tsconfig
+    utils.find_nearest_tsconfig = function()
+      return {}
+    end
+
+    local result = utils.parse_flags(flags)
+
+    -- Restore original function
+    utils.find_nearest_tsconfig = original_find_nearest_tsconfig
+
+    assert.is_true(string.find(result, "--project") == nil)
+  end)
+end)
+
+describe("ANSI color parsing fix", function()
+  it("Includes --color false flag by default when not explicitly set", function()
+    local flags = {
+      noEmit = true,
+      watch = false,
+    }
+
+    local result = utils.parse_flags(flags)
+
+    assert.is_true(string.find(result, "--color false") ~= nil)
+  end)
+
+  it("Respects explicit color configuration", function()
+    local flags = {
+      noEmit = true,
+      watch = false,
+      color = true,
+    }
+
+    local result = utils.parse_flags(flags)
+
+    assert.is_true(string.find(result, "--color") ~= nil)
+    assert.is_true(string.find(result, "--color false") == nil)
+  end)
+end)
+
+describe("Working directory mismatch fix", function()
+  it("find_nearest_tsconfig returns absolute path", function()
+    -- Mock vim.fn.findfile to return a relative path
+    local original_findfile = vim.fn.findfile
+    local original_fnamemodify = vim.fn.fnamemodify
+
+    vim.fn.findfile = function(name, path)
+      return "./tsconfig.json"
+    end
+
+    vim.fn.fnamemodify = function(path, modifier)
+      if modifier == ":p" then
+        return "/absolute/path/tsconfig.json"
+      end
+      return path
+    end
+
+    local result = utils.find_nearest_tsconfig()
+
+    -- Restore original functions
+    vim.fn.findfile = original_findfile
+    vim.fn.fnamemodify = original_fnamemodify
+
+    assert.equals("/absolute/path/tsconfig.json", result[1])
+  end)
+
+  it("get_project_root returns correct directory", function()
+    -- Mock vim.fn.fnamemodify
+    local original_fnamemodify = vim.fn.fnamemodify
+
+    vim.fn.fnamemodify = function(path, modifier)
+      if modifier == ":h" then
+        return "/absolute/path"
+      end
+      return path
+    end
+
+    local result = utils.get_project_root("/absolute/path/tsconfig.json")
+
+    -- Restore original function
+    vim.fn.fnamemodify = original_fnamemodify
+
+    assert.equals("/absolute/path", result)
+  end)
+
+  it("get_project_root handles nil input", function()
+    local result = utils.get_project_root(nil)
+    assert.equals(nil, result)
+  end)
+end)
+
+describe("TSC output parsing", function()
+  it("Parses TSC output correctly", function()
+    local output = {
+      "src/test.ts(10,5): error TS2304: Cannot find name 'foo'.",
+      "src/other.ts(20,10): error TS2322: Type 'string' is not assignable to type 'number'.",
+    }
+
+    local config = { pretty_errors = false }
+    local result = utils.parse_tsc_output(output, config)
+
+    assert.equals(2, #result.errors)
+    assert.equals("src/test.ts", result.errors[1].filename)
+    assert.equals(10, result.errors[1].lnum)
+    assert.equals(5, result.errors[1].col)
+    assert.equals("error TS2304: Cannot find name 'foo'.", result.errors[1].text)
+
+    assert.equals("src/other.ts", result.errors[2].filename)
+    assert.equals(20, result.errors[2].lnum)
+    assert.equals(10, result.errors[2].col)
+    assert.equals("error TS2322: Type 'string' is not assignable to type 'number'.", result.errors[2].text)
+  end)
+
+  it("Handles empty output gracefully", function()
+    local config = { pretty_errors = false }
+    local result = utils.parse_tsc_output(nil, config)
+
+    assert.equals(0, #result.errors)
+    assert.equals(0, #result.files)
+  end)
+end)
diff --git a/lua/tsc/utils.lua b/lua/tsc/utils.lua
index 6433bcb..60fc40a 100644
--- a/lua/tsc/utils.lua
+++ b/lua/tsc/utils.lua
@@ -51,12 +51,19 @@ M.find_nearest_tsconfig = function()
   local tsconfig = vim.fn.findfile("tsconfig.json", ".;")
 
   if tsconfig ~= "" then
-    return { tsconfig }
+    return { vim.fn.fnamemodify(tsconfig, ":p") }
   end
 
   return {}
 end
 
+M.get_project_root = function(tsconfig_path)
+  if tsconfig_path then
+    return vim.fn.fnamemodify(tsconfig_path, ":h")
+  end
+  return nil
+end
+
 M.parse_flags = function(flags)
   if type(flags) == "string" then
     return flags
@@ -64,6 +71,19 @@ M.parse_flags = function(flags)
 
   local parsed_flags = ""
 
+  -- Auto-detect project if not explicitly configured
+  if not flags.project then
+    local nearest_tsconfigs = M.find_nearest_tsconfig()
+    if #nearest_tsconfigs > 0 then
+      flags.project = nearest_tsconfigs[1]
+    end
+  end
+
+  -- Add --color false to ensure plain text output for parsing, unless user explicitly set color
+  if flags.color == nil then
+    flags.color = false
+  end
+
   for key, value in pairs(flags) do
     key = string.gsub(key, "%-%-", "")