When is the inclusive method typically required in auditing?

The inclusive method is typically required in auditing when dealing with more significant and complex services. This approach involves the auditor considering both the controls at the service organization and the controls at the user entity to form a comprehensive understanding of the risk and control environment. Larger and more complex service organizations often have intricate processes and controls that can significantly impact the financial reporting of the user entity. Using the inclusive method ensures that auditors can adequately assess these relationships and the effectiveness of the controls in place, thus providing sufficient assurance regarding the financial statements.

In contrast, simpler service organizations may not necessitate the same rigorous examination because their impact on the user's financial statements is less significant, thereby not requiring an equally exhaustive audit approach. Therefore, the inclusive method aligns with the auditing standards for instances where complexity and significance necessitate a more detailed investigation into controls.