Risk of Material Misstatement (RMM)

Presumed Fraud Risks & Impact on Audit Approach

The Risk of Material Misstatement (RMM) training is a core audit program designed to strengthen audit quality by reinforcing the practical application of ISA 315 and ISA 240. It focuses on how auditors identify, assess, and respond to risks at both the financial statement and assertion levels, with particular emphasis on presumed fraud risks and their direct impact on audit planning, procedures, and evidence.

This training reinforces the firm’s risk-based audit methodology, highlighting that RMM is not a documentation exercise, but the foundation that drives audit strategy, sample sizes, and professional judgment throughout the engagement lifecycle.

The course applies to:

• All statutory audits performed under ISAs
• All material classes of transactions, account balances, and disclosures
• All engagement team members involved in planning, execution, and review

The training emphasizes the auditor’s responsibility to apply professional skepticism, properly identify significant risks, and design audit responses that are clearly linked to assessed RMM. Strong RMM assessments support efficient audits, defensible conclusions, and consistent audit quality.

Key Learning Objectives:

By the end of this training, participants will be able to:

• Explain the concept of Risk of Material Misstatement and its components (inherent risk and control risk).
• Assess RMM at both the financial statement level and the assertion level for all relevant balances and disclosures.
• Identify and understand the two presumed fraud risks required under ISA 240:
  • Management override of controls
  • Revenue recognition
• Design and apply appropriate audit responses that directly address identified RMM.
• Understand how RMM impacts audit strategy, sample sizes, nature and extent of procedures, and evidence requirements.
• Apply professional judgment and skepticism when evaluating fraud risks and significant risks.
• Document risk assessments and audit responses in a clear, logical, and ISA-compliant manner.

Who Should Attend:

This training is designed for:

• Audit Staff
• Senior Auditors
• Audit manager
• Audit partner

It is particularly relevant for staff transitioning from execution-focused roles to greater involvement in planning, judgment, and risk assessment.

Course Highlights:

Participants will explore:

• Understanding RMM in a Risk-Based Audit
  How RMM underpins the entire audit approach and determines where audit effort is focused.
• RMM Assessment Across All Accounts and Assertions
  Practical guidance on assessing risks for every material account balance and disclosure, with emphasis on identifying relevant assertions (occurrence, completeness, accuracy, valuation, cut-off, etc.).
• Presumed Fraud Risks under ISA 240
  In-depth discussion of:
  • Management override of controls and required audit responses
  • Revenue recognition fraud risks and why revenue is inherently high risk
• Audit Responses to Identified Risks
  How to design tailored substantive procedures, incorporate unpredictability, test controls when appropriate, and respond specifically to significant risks.
• Impact on Sample Size, Evidence, and Audit Effort
  Understanding how higher RMM results in:
  • Larger sample sizes
  • More persuasive audit evidence
  • Increased senior involvement
  • Reduced reliance on analytical procedures
• Linking Risk Assessment to Quality Outcomes
  How strong RMM assessments lead to efficient audits, defensible conclusions, and compliance with ISAs.

Prerequisites:

Participants are encouraged to have:

• A basic understanding of the audit process and audit planning.
• Familiarity with:
  • ISA 315 (Identifying and Assessing the Risks of Material Misstatement)
  • ISA 240 (The Auditor’s Responsibilities Relating to Fraud)
• Prior experience performing substantive audit procedures and basic documentation.

This course does not require advanced technical accounting knowledge and is suitable for all service teams performing financial statement audits.