A risk-based approach to auditing financial statements involves identifying and assessing
the ‘risk of material misstatement’ (RoMM) and responding to those risks to express an
appropriate opinion on whether the financial statements are free from material
misstatements. Standards on Auditing (SA) 315 and International Standards on Auditing
(ISA) 315 deal with identifying and assessing RoMM. Robust risk identification and
assessment by the auditor is the key to conducting quality audits.