Company: NOTV
Filing Date: 2025-12-05
Form Type: 10-K
Source: 0001628280-25-055483
Chunk: 199

Company: Inotiv, Inc.
Filing Date: 2025-12-05
Form: 10-K
Item: Item 8
Chunk 199
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 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 the critical audit matter does not alter in any way our opinion on the consolidated 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.

69

Revenue recognition for Over Time Service Contracts

Description of the matterFor the year ended September 30, 2025, the Company recorded service revenue of $232.9 million. As described in Note 2 to the consolidated financial statements, the Company derives a portion of its revenues from service revenue contracts which include fixed fee arrangements. Certain of these service revenue contracts are recognized over time (“Over Time Service Contracts”) using the input method based on the ratio of direct costs incurred to date under the contract to total estimated direct costs expected to be incurred to complete the contract.Auditing the revenue recognition related to Over Time Service Contracts can be challenging due to the judgment by management in determining the timing of recognition of revenue as services are provided, including the Company’s estimate of expected costs to be incurred to complete the contract. Auditing the estimate of expected costs involved a high degree of auditor judgment and increased audit effort due to the determination of the current status of the contract and remaining cost to complete and their impact on the amount of revenue recognized.How we addressed the matter in our auditOur audit procedures relating to management’s estimates included, among others, selecting a sample of contracts and comparing the transaction prices to the consideration expected to be received based on current rights and obligations under the contracts and any contract modifications that were agreed upon with the customers. We tested costs incurred and applied to contracts for accuracy, existence, completeness, and proper classification. We evaluated the reasonableness of management’s forecast of remaining costs for the selected contracts, which included understanding the current status of the contract, comparing current estimated costs to original estimates and corroborating our understanding of the status and remaining cost estimates of projects through discussions with project managers. Lastly, we evaluated the reasonableness of management’s estimate by comparing final contract costs to cost estimates for a sample of historical in-process service contracts completed in the current year.

/s/ Ernst &