## Risk of Material Misstatement: Significant Non-Routine Transactions

Significant risks often relate to significant non-routine transactions or judgmental matters.

Definition: Non-routine transactions are unusual due to either size or nature, and therefore occur infrequently.

### Why RMM Is Greater for Non-Routine Transactions

Factor	Explanation
Management intervention	Greater management intervention to specify accounting treatment
Manual processing	Greater manual intervention for data collection and processing
Complexity	Complex calculations or accounting principles involved
Control difficulty	Nature of transaction makes it difficult to implement effective controls

### Key Principle

The auditor must give special attention to significant non-routine transactions when assessing the risk of material misstatement, because normal control systems are often not designed to handle them.

Worked example

### Example 1

Scenario: Auditor of Sunshine Ltd. concluded that risk of material misstatement is greater for significant non-routine transactions. Is this view correct?

Answer: Yes, the view is correct. Significant risks often relate to non-routine transactions. Greater management intervention, manual processing, complex calculations, and difficulty implementing effective controls all increase the risk of material misstatement for such transactions.

### Example 2

Exam tip: If a question describes an unusual large transaction (e.g., a one-time asset sale, a merger-related entry), classify it as a non-routine transaction and identify which of the four factors above elevate its RMM.

⚠️ Common exam mistakes

Confusing 'non-routine' with simply 'large' — size alone does not make a transaction non-routine; it must also be unusual in nature or frequency.
Forgetting that non-routine transactions may lack effective controls precisely because the entity's control system is designed for routine operations.
Treating all four factors as always present — in an exam scenario, identify only those factors that the facts support.

Reference: — SA 315 – Identifying and Assessing the Risk of Material Misstatement through Understanding the Entity and its Environment

Now that you've read this — what's next?

Move from understanding → mastery in 3 clicks. Each option below picks up from this lesson's topic.

🔥 Drill 5 Qs on this → ✍️ Adaptive practice →

Risk of Material Misstatement – Significant Non-Routine Transactions

Worked example

⚠️ Common exam mistakes