Company: ECIA
Filing Date: 2025-07-10
Form Type: 10-K
Source: 0001079973-25-001132
Chunk: 34

Company: ENCISION INC
Filing Date: 2025-07-10
Form: 10-K
Item: Item 1
Chunk 34
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 Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding
of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to
assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The
critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated
or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial
statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters
does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit
matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

21 

Inventory Valuation -
Finished Goods

The Company’s inventories consist of finished
goods and raw materials, which are manufactured or purchased for use in the Company’s finished goods. The Company offers several
different products to its customers. The cost of the internally produced inventory is a combination of raw materials, labor to convert
those materials to components of the inventory to finished goods, and an allocation of overhead and related costs. Significant judgment
is exercised by the Company in determining the components of the costs of inventory and includes the determination of which costs to include
at each manufacturing phase, including overhead allocation and materials used for production of finished goods, and monitoring the appropriate
absorption of the overhead cost and correcting the hourly rate when necessary

How the Critical Audit
Matter Was Addressed in the Audit

Our principal audit procedures