G
Which controls are you testing? Are you testing internal control over financial reporting and are you testing them so that management can express an opinion on the effectiveness of internal control over financial period as of the end of the fiscal year?
For the purpose of expressing an opinion on the effectiveness of internal control over financial period as of the end of the fiscal year they only need to be effective at the end of the fiscal year (or during a short-period before the end to demonstrate that they were effective for some time and not merely on one day by chance). So if they can fix or change their controls and you later test the changed controls, then the earlier failures of the old controls are irrelevant for that purpose.
However, the failures of the controls may have already led to material misstatements of the financial statements. So from this different point of view and especially when the controls relate to income statement or cash flow statement items, you want to find out whether there were any misstatements and to have them corrected. In addition, for purposes of the public accountant’s regular opinion on the financial statements, he will test some of the controls over processes that produce transactions that are inlcuded in the income statement or the cash-flow statement. So the public accountant may also test controls over transactions that occurred earlier during the year and has an interest in the correction of misstatements.
In conclusion, you can still get a clean opinion on the effectiveness of internal control over financial reporting as of the end of the fiscal year, but you will need to investigate past errors if there is a reasonable risk that the financial statements may be misstated because of those weak controls. If the aggregated amounts that have been produced by the process with weak controls up to the moment of your testing are material in relation to the amounts for the entire year (i.e. a forecast) in the financial statements (e.g. as a percentage of net profit or of net profit before taxes or shareholders’ equity or of total assets, etc.), you will need to investigate. Otherwise youd probably should not have tested the process anyhow due to its lack of materiality.