A new rule adopted by the Public Company Accounting Oversight Board (“PCAOB”) became effective for certain public filers, which requires an independent auditor to disclose in its audit report, certain challenges it faced, referred to as “critical audit matters”, while reviewing and auditing the financial statements of public companies.
Despite the rule’s short lifespan, having only become effective earlier this year, recent filings and news reports have highlighted the importance of the rule as well as managements’ response to critical audit matters identified by the company’s auditors. For example, a recent Wall Street Journal article reported that in addition to providing investors with more robust disclosures about a company’s financial reporting, the new rule is causing companies to re-evaluate their internal controls and procedures over financial reporting in order to remedy any weaknesses uncovered during the audit.
While there is no doubt that a “critical audit matter” is material to an investor’s evaluation of a company’s performance, how a company’s management reacts to that potential weakness is of equal, if not greater, importance.
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Faruqi & Faruqi, LLP focuses on complex civil litigation, including securities, antitrust, wage and hour, personal injury and consumer class actions as well as shareholder derivative and merger and transactional litigation. The firm is headquartered in New York, and maintains offices in California, Delaware, Georgia and Pennsylvania.
Since its founding in 1995, Faruqi & Faruqi, LLP has served as lead or co-lead counsel in numerous high-profile cases which ultimately provided significant recoveries to investors, direct purchasers, consumers and employees.
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About Michael Van Gorder
Michael Van Gorder's practice is focused on securities litigation. Michael is a Partner in the firm's Delaware office. Prior to joining F&F, Michael served as a law clerk to the Honorable James T. Vaughn, Jr. of the Delaware Supreme Court (2015-16). While attending law school, Michael served as the Editor-in-Chief of the Delaware Journal of Corporate Law and was selected as a Josiah Oliver Wolcott Fellow with the Delaware Supreme Court. Before law school, Michael worked in the private bank of a global financial services firm where he held multiple securities licenses.Michael has authored the following article: Boilermakers v. Chevron: Are Board Adopted Arbitration Bylaws Valid Under Delaware's General Corporation Law?, 39 Del. J. Corp. L. 443 (2014).Michael received his J.D., magna cum laude, from Widener University School of Law (2015). Michael received his B.S., Business Management, 2008; M.B.A., Finance, 2011, from Wilmington University. Michael is licensed to practice law in the state of Delaware and is admitted to the United States District Court of Delaware.