SOX and Materiality Threshold 1532

  • A recent bill has been proposed that challenges the materiality threshold for reporting of control weaknesses…
    ‘… In a move of possibly sweeping implications for financial reporting, the bill would also change the current Sarbox standard of MATERIALITY for reporting controls weaknesses to 5 percent of net profits. Under current 404 rules, controls weaknesses must be reported if there is ‘more than a remote likelihood’ that a misstatement is ‘more than inconsequential’ and will not be prevented or found.
    By stating a specifically numeric standard, the bill departs radically from the reigning materiality guidance under the Securities and Exchange Commission’s Staff Accounting Bulletin No. 99. SAB 99 specifically rules out the use of a percentage threshold to gauge whether amounts are material to the financial statements.’

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