ACCA AAA · Chapter 12
Question practice on risk
Your chapter at a glance. Open any section, or keep the whole map in view.
A road map for evaluating RoMM
Evaluate RoMM fact, treatment, misstatement, significance
Interpret the requirement
- Identify the risk type, marks and required output
- Allow marks for materiality, analysis and prioritisation
- Aim for evaluated risks rather than a long list
Determine materiality
- Use the benchmark specified in the question
- Show calculation and justify the chosen amount
- Apply it throughout; consider qualitative significance
Preliminary analysis
- Calculate relevant trends, ratios and relationships
- Investigate unusual movements without assuming misstatement
A focused evaluation
- Select the relevant scenario fact
- Explain the required financial reporting treatment
- Identify affected amount/disclosure and direction of misstatement
- Explain significance using materiality and other factors
Qualitative factors
- Complexity and estimation uncertainty
- Fraud, management bias and unusual transactions
- New requirements or limited management competence
Be precise
- Separate distinct RoMM arising from the same matter
- Avoid unsupported assertions and repeated points
Consider more than size
- Amount relative to materiality
- Complexity, judgement and estimation uncertainty
- Management bias and quality of supporting evidence
- Effect across several financial statement elements
Justify the ranking
- Link each priority to particular scenario facts
- Explain why a risk may be difficult to evaluate
- Consider aggregate effect of smaller misstatements
Professional judgement
- A defensible order matters more than one fixed ranking
Professional skills
- Use clear headings and readable calculations
- Show analysis through fact, treatment and misstatement
- Challenge unsupported management explanations
- Recognise the commercial effect of events
Final answer check
- Specified materiality basis applied?
- Relevant calculations and scenario facts used?
- Correct treatment and direction of misstatement stated?
- Priorities supported by reasons?
- Audit procedures omitted unless required?
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