Tailoring RoMMs

1. Refer back to last week's case. On the basis of the facts stated therein related to the
   contract between MM and Stone, a customer, what are some risks of material
   misstatement (RoMMs) that we may identify as part of our audit? Handout 1, the
   RoMMs matrix, may be used to assist with identifying relevant RoMMs.
2. Tailoring RoMMs to the specific revenue streams and assertions is an important step
   in designing an audit plan for revenue. Now that you have identified the RoMMs that
   are applicable to the contract between MM and Stone, how might you tailor the
   RoMMs that you identified in Activity 1 to the facts presented in this case?
3. Identify internal controls that address the tailored RoMMs identified in Activity 2.
   Handout 2, MM’s internal control matrix, may be used to assist with identifying
   relevant internal controls. If REV 7 is identified as a relevant internal control, identify
   which specific step in the control addresses the RoMM.
4. Design substantive procedures that address the tailored RoMMs identified in Activity

Sample Solution