Attorney Article

The Practical Lawyer Publishes Manisero on CAMs Disclosures for Outside Auditors

The Practical Lawyer

September 2, 2021

Author: Thomas R. Manisero

Thomas Manisero (Partner- White Plains, NY | New York, NY) co-authored “A Corporate Governance Anomaly: Requiring Outside Auditors to Disclose CAMs May Have Unintended Consequences” for the August 2021 edition of The Practical Lawyer. Taking a step beyond generally accepted audit standards (GAAS), which require auditors to communicate significant findings to the company being audited, the Public Company Accounting Oversight Board’s new standards for communicating critical audit matters (CAMs) in an auditor’s report “misses the mark,” according to Tom. The public disclosure shift in burden from the corporate governors to the auditor does not provide shareholders with the information needed to understand the company’s financial affairs and can lead to possible legal implications involving outside auditors. Tom notes that an outside auditor can easily second-guess “the number and extent of the CAMs disclosed” leading “to allegations in a lawsuit or claim relating to the failure to uncover a material error or fraud in the audit.” The article concludes: “In the authors’ opinion, increasing the quality and independence of boards of directors and enhancing the requirements to qualify as an ACFE [audit committee financial expert] will have a more beneficial effect on the quality of an entity’s financial reporting than the auditor’s public disclosure of CAMs.” 

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