SOX Scoping
FY26 scoping for Northbridge Instruments, Inc.. Overall materiality $21.4M, 5% threshold for significant accounts, 10% for locations.
Pending scope decision — Cerritos manufacturing plant
The Cerritos plant now represents 11.4% of consolidated inventory following the Halcyon consolidation, crossing the 10% location threshold in methodology §4.2. Recommend bringing 14 inventory controls in scope, adding roughly 180 testing hours. Halcyon's own San Jose site remains excluded under the first-year acquisition exclusion. Evidence request EV-2052 was sent early to protect the timeline.
- Controls added
- 14 inventory controls
- Testing hours
- ~180 hours
- Due
- Sep 19 (AP-308)
- External auditor
- Aligned — notified Sep 11
Materiality & thresholds
Basis for every scoping recommendation
- Revenue
- $4.28B
- Overall materiality
- $21.4M
- Performance materiality
- $16.1M (75%)
- Clearly trivial
- $1.07M (5%)
- Account threshold
- 5% of revenue
- Location threshold
- 10% of revenue or inventory
Scoping workbench
Filter, review the AI's reasoning, and decide — every decision is logged
| Account | Balance | % of rev | Assertions | Process | Scope driver | Decision |
|---|---|---|---|---|---|---|
| Revenue | $4,280M | 100% | Occurrence, Cutoff, Accuracy | Order to Cash | Largest account; fraud risk presumed (R-01) | In scope |
| Accounts receivable | $742M | 17.3% | Existence, Valuation | Order to Cash | Above 5% threshold; key report IPE-005 | In scope |
| Inventory | $611M | 14.3% | Existence, Valuation | Inventory & Cost Accounting | Halcyon consolidation raised balance 31% | In scope |
| Accounts payable | $388M | 9.1% | Completeness, Accuracy | Procure to Pay | Completeness risk; duplicate vendor trend | In scope |
| Accrued compensation | $164M | 3.8% | Completeness, Accuracy | Payroll & Equity | Estimate with judgment; new equity plan FY27 | In scope |
| Income taxes payable | $97M | 2.3% | Accuracy, Valuation | Tax Provision | Complex estimate; Pillar Two effective FY27 | In scope |
| Prepaid expenses | $31M | 0.7% | Existence | Financial Close | Below threshold; low inherent risk; no history of misstatement | Out of scope |
| Other current assets | $18M | 0.4% | Existence | Financial Close | Below clearly-trivial at individual item level | Out of scope |
How the AI team scoped FY26
Mapped the trial balance to 8 account groupings and flagged everything above the 5% threshold, plus locations above 10% of revenue or inventory. 14 systems traced to in-scope accounts.
Added income taxes (estimate complexity) and flagged the Halcyon integration, Cerritos threshold breach, and the new CPQ pricing rules as risk factors despite mixed quantitative results.
Everything quantitative the AI applied directly; the 9 review-required items and the Cerritos location decision wait on you. Each decision carries its full lineage for the external auditor.