Professional Review and

Training Center (PRTC)

Identifying and
Assessing Risks of
Material Misstatement
(AT.2509)
Leomar R. Cabarles
 ROMM: Why and How

Why?
• Focus on important areas

How?
• Professional judgment
• Understanding of the entity,
its environment, and IC
 Not
prevented
or detected
and
corrected
Significant Risks

Require special
audit consideration
 Risks for Which Substantive Procedures
Alone Do Not Provide SAAE

• Relate to:
 inaccurate recording
 of routine transactions
 with highly automated
processing

• Understand control
 Process to Identify and Assess ROMM

1. Identify risks, including relevant controls, and by

considering the COT/AB/D in the FSs;
2. Assess the identified risks, and evaluate whether
they relate to risks at FSs level;
3. Relate the identified risks to what can go wrong at
the assertion level, taking account of relevant
controls that the auditor intends to test; and
4. Consider the likelihood of misstatement, including
the possibility of multiple misstatements, and
whether the potential misstatement is of a magnitude
that could result in a material misstatement.
Process to Identify and Assess ROMM
Step 1—Identify, Assess and Relate Risks to F/S
Step 2—Relate Risks to Assertion and Control
Step 3—Consider Likelihood & Magnitude of
Misstatement
Process to Assess Inherent Risk
Process to Assess Control Risk
Assessed Control Risk and TOC
ROMM Matrix
Sample Assessed ROMM
-now do the DIY drill-
 DIY Drill Answers

1. C
2. C
3. A
4. A
5. D
 DIY Drill Answers

6. B
7. D
8. A
9. B
10. C
 DIY Drill Answers

11. B
12. D
13. A
14. B
15. A
 end of AT.2509 