Certified Internal Auditor (CIA) Practice Test

What is the expected outcome if the auditor determines that the internal controls are functioning as designed?

1. Ace the audit engagement.

2. Recommend significant changes.

3. Proceed with testing and reporting.

4. Notify management immediately.

The correct answer is: Proceed with testing and reporting.

When the auditor determines that the internal controls are functioning as designed, the appropriate action is to proceed with testing and reporting. This indicates that the controls are operating effectively and provide reasonable assurance that the organization's objectives will be met. By confirming that the internal controls are functioning properly, it gives the auditor the confidence to carry out subsequent audit procedures. The auditor can rely on these controls when evaluating the effectiveness of operations or financial reporting. Consequently, this step allows for a more streamlined audit process, as the auditor can focus on areas of higher risk or where controls may not be as robust. On the other hand, recommendations for significant changes or immediate notifications to management would typically arise from findings of control deficiencies or weaknesses. Thus, if the controls are already functioning effectively, there is no need for such action. Additionally, the phrase “ace the audit engagement” does not accurately capture the systematic and necessary steps that follow a determination of effective controls, which involves further testing and documentation rather than a blanket conclusion of success.