This study examines whether critical audit matters (CAMs) disclosed in expanded audit reports signal heightened uncertainty about borrowers’ creditworthiness and shape lenders’ demand for financial covenants in private debt contracts. Using U.S. loans issued between 2019 and 2023, we find that performance- (capital-) related CAMs are positively associated with performance- (capital-) based covenants, consistent with lenders tailoring covenant structure to the sources of uncertainty highlighted by auditors. We show that CAMs are associated with increased downside uncertainty in distance to default, which helps explain their link to covenant design. We also find that financial statement items identified in CAMs are more reflective of creditworthiness, suggesting that CAM disclosures help lenders assess the debt contracting value of accounting information, thereby improving contracting efficiency through optimized financial covenant design.