The authors provide an overview of critical audit matters and discuss if related litigation is on the horizon.
CAMs are the things that keep the auditor up at night—those matters that involve especially challenging, subjective or complex auditor judgment. The Public Company Accounting Oversight Board required the disclosure of CAMs for large accelerated filers for audits of fiscal years ending on or after June 30, 2019.
Not surprisingly, companies and their auditors expressed concerns that reporting CAMs would increase litigation risk. Authors Greg Eastman, Elaine Harwood, Steven McBride, and Jean-Philippe Poissant discuss whether a stock price decline may be attributable to a CAM based on the types of CAMs that have recently been disclosed for the largest publicly traded companies. They also discuss whether the U.S. Supreme Court’s Lorenzo v. U.S. Securities and Exchange Commission has the potential to increase the number of CAM-related claims.
This article was originally published by Law360 in October 2019.
The views expressed herein do not necessarily represent the views of Cornerstone Research.