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Probe | How is Risk of Material Misstatement calculated?

Published:  24/07/2023
How is Risk of Material Misstatement (ROMM) calculated?

  Answer:

We have a very nice video on ROMM (Risk of Material Misstatement), click here to watch.

Risk of material misstatement is made up of the following:
  1. Risk assessment at assertion level for inherent risk – 11.60
  2. Risk assessment at assertion level for fraud risk – 11.60
  3. Specific materiality for the line item – 11.60
  4. Risk assessment at financial statement level for inherent risk – 11.20
  5. Risk assessment at financial statement level for fraud risk – 11.25
  6. Risk assessment at financial statement level for control risk – 11.30

If a section is material you can never have a ROMM lower than medium.
 
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