What is a consequence of a greater risk of RMM in an audit?

In audits, a greater risk of relevant misstatement (RMM) indicates that there is a higher likelihood that financial statements may be materially misstated. When auditors identify an increased RMM, it necessitates a reassessment of audit procedures to mitigate that risk effectively. Shifting from interim testing to year-end testing is a typical response because year-end testing allows auditors to gather more comprehensive evidence about the account balances and transactions as they reflect the complete financial year, rather than relying on interim results which may not capture all relevant information.

This approach ensures that the auditor gathers sufficient and appropriate evidence to address the heightened risk. It emphasizes the need for thorough testing at the end of the reporting period when the auditor can evaluate the full scope of transactions, accounting estimates, and controls that have been in effect for the entire period. By increasing the focus on year-end activities, auditors aim to obtain a more reliable basis for their conclusions, thereby addressing the greater risk posed by the identified RMM.