Planning Materiality and Deficiency Materiality calculations 2434

  • In our first year of SOX compliance, our NIBT was not consistent, and thus it was decided to use Revenue as a starting point to calculate planning materiality and to an extent as a guide for deficiency USD impact evaluations.%0AAs I go back thru the prior years scoping info, I see that the prior folks in our Company used the Revenue numbers and combined them with the general investor guideline of 5% for material deficiencies and the .5-1% range for immaterial against the revenue numbers, then they took a ‘haircut’ and came up with their PM/material threshold. %0AI can’t find any information of how they came up with the haircut they used…and all the info I find as I search the web, is the haircut is based on risk…which is great…but does anyone have some more definitive guide?%0ANow that we’ve stabalized and are showing NIBT profit (but not consistent year to year), I would rather use the planning base on NIBT, but I doubt if that will fly with upper mgmt as we’ve been using Revenue in the past. So I am probably stuck with trying to figure out how to explain how I came up with the ‘haircut’.? Any ideas?

  • Materiality will be different for the balance sheet versus the income statement. For the balance sheet, a % of total assets is a common metric. For the income statement, I would suggest a materiality based on EPS instead of NIBT. Unless your share count is changing dramatically, the amount of income that it takes to make a one cent per share difference will not change much year-to-year. The level of EPS would be up to you, but if you are a smaller company, then I would look at one-three cents as material.

  • :?:
    My group is going to its third certification year, but we have a new question this year. The group acquired a new company and we, of course, did not have enough time to centralize the controls. I’d like to know if we must calculate a specific materiality to this new one or we can apply the group number.
    AS5 cites in it paragraph B16 ‘In situations in which the SEC allows management to limit its assessment of internal control over financial reporting by excluding certain entities’. Do you know whether I can find a list of these situations?

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