Acca aaa s21 Notes

components
of a system of 
internal control and the different types of 
control activities
. Remember than control activities are just 
one
of the components.
3.4. Risks of Material Misstatement (RoMM)
A risk of material misstatement exists when there is a 
reasonable possibility
of: 
1. A misstatement occurring (i.e. 
likelihood
); and 
2. It being material if it were to occur (i.e. 
magnitude
). 
September 2021 to June 2022 exams
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RoMM must be assessed at two levels to provide a basis for designing further audit procedures:
๏
The 
financial statement
level (i.e. relating to the financial statements, for example, the risk of 
management override of internal control).
๏
The 
assertion 
level (i.e. relating to classes of transactions, account balances and disclosures).
See 
Chapter 16 of our AA notes
if you need to revise the financial statement assertions.
RoMM is assessed at the 
assertion
level to determine the 
nature, timing and extent
of further audit 
procedures necessary to obtain sufficient appropriate audit evidence. It has two components – 
inherent
risk and
control
risk (see Chapter 11 for details).
IAS 315 (Revised 2019) introduced new concepts and definitions to assist with the identification and 
assessment of risks of material misstatement.
๏
Inherent risk factors
– characteristics of events or conditions that affect the susceptibility of an 
assertion to misstatement, before consideration of controls.
๏