The effectiveness of entity-wide controls may reduce the extent of testing of transaction controls.

Question

Quizplus · Accepted Answer

Entity-wide controls can provide assurance over the overall effectiveness of the internal control system, which may reduce the extent of testing required for transaction controls. This is because entity-wide controls indirectly address transaction-related risks by establishing a strong control environment and reducing the likelihood of errors or fraud occurring in transaction processes. However, it is important to note that entity-wide controls do not eliminate the need for transaction controls altogether and some testing of transaction controls may still be necessary to ensure the completeness and accuracy of financial transactions.

The Effectiveness of Entity-Wide Controls May Reduce the Extent of Testing