The article explains how auditors identify and assess risks of errors or fraud in financial statements. They do this by understanding the company and its internal controls. By following specific guidelines (AU-C 315 and AU-C 330), auditors can design audit procedures to address these risks. Significant risks, which need special attention, are also considered. The auditor's risk assessment procedures provide evidence to support their assessments and determine the extent of further audit procedures. This helps auditors form an opinion on the financial statements.