Question

Which of the following are the conditions when limited tests of details of transactions occurring between the interim period and the year-end are necessary?

1) The entity's control environment has been assessed as effective.
2) Controls have been tested.
3) No significant changes in the control environment have occurred.
4) Major changes are required in internal controls.

Answer 1

Limited tests of details are necessary when the control environment is ineffective, controls have not been tested, or there have been significant changes in the control environment. The correct answer is option 1, 2 and 3 .

Step-by-step explanation:

The conditions when limited tests of details of transactions occurring between the interim period and the year-end are necessary are:

1. If the entity's control environment has been assessed as ineffective.
2. If controls have not been tested.
3. If there have been significant changes in the control environment.

In these situations, limited tests of details of transactions are required because the control environment is not deemed effective, controls have not been adequately tested, or there have been significant changes in the control environment.

These conditions increase the risk of material misstatements in the financial statements, making it necessary to perform additional testing on the transactions. It is important to ensure that these conditions are properly evaluated and addressed to maintain the integrity of the financial reporting process.