Risk management in audit and assurance sits at the heart of every reliable set of accounts. Boards, investors and regulators all expect figures they can trust, yet the commercial climate in 2025 is anything but settled. Economic growth remains uneven, supply-chain shocks linger, and digital fraud continues to rise. Against this backdrop, a risk-driven audit is no longer a theoretical best practice – it is a prerequisite for sound decision-making.
Our task goes well beyond ticking compliance boxes. We begin by studying the wider environment: tax policy shifts, sector-specific regulation, cyber-security threats and macro-economic trends. These external forces shape the pressures management faces and, in turn, the risks embedded in the numbers. HMRC recovered £41.8 billion through compliance work in 2023/24 (HMRC, 2024) – proof that even apparently minor weaknesses in control can convert into material losses.
Once the context is clear, we move inside the organisation, mapping processes, controls and the culture that binds them together. By aligning every testing step with the areas that matter most, we ensure our audit provides genuine assurance instead of distraction. In short, effective risk management in audit and assurance is how we transform statutory scrutiny into strategic insight.
Why risk management matters in audit and assurance
Audit standards require us to design procedures that target the areas most likely to be wrong. By anchoring the engagement on risk management in audit and assurance, we:
- Reduce the chance of undetected misstatement.
- Focus fees on the matters that genuinely influence decisions.
- Strengthen governance, often highlighting control gaps boards can fix long before HMRC or the FCA raise questions.
Fraud is a growing concern. The Office for National Statistics reports a 33% jump to 4.1 million fraud incidents in the year to December 2024 (ONS, 2024). A risk-oriented audit is the first line of defence.
The risk-based audit approach
International Standards on Auditing (UK) tell us that planning starts with understanding the entity and its environment. When we perform risk management in audit and assurance, we:
- Hold kick-off interviews with directors, finance and operational leads.
- Map business processes against financial statement line items.
- Identify inherent risks: market volatility, complex contracts, rapid growth and sector-specific regulations.
- Evaluate existing controls – authorisations, reconciliations, segregation of duties.
The outcome is a bespoke audit plan. High-risk balances receive detailed testing while low-risk areas may rely on robust controls or analytical review. This proportionate response keeps disruption low without sacrificing quality.
Identifying and assessing risks of material misstatement
We assess both inherent and control risk to determine the combined risk of material misstatement (RMM). For each assertion we consider:
- Susceptibility to error or fraud.
- Complexity of estimates.
- History of issues.
- Pressure, opportunity and rationalisation factors.
Cashflow forecasts, revenue recognition and share-based payments often score highly. Risk management in audit and assurance demands that we document rationale, set quantitative thresholds and brief every team member on the planned response.
Responding to risks: Practical mitigation techniques
Once risks are ranked, our responses include:
- Targeted substantive testing: Sample sizes increase or techniques shift from analytical review to reperformance.
- Controls testing: Walk-throughs and re-performance confirm whether controls operated throughout the year.
- Data analytics: Whole-ledger analysis flags unusual journals, duplicate payments or outliers.
- Expert input: Valuation specialists assess complex derivatives; IT auditors review system access and change logs.
By aligning procedures with the spectrum of threats we embed risk management in audit and assurance into every work-paper.
Fraud risk: Staying ahead of evolving threats
The UK lost £1.17 billion to fraud in 2023 according to UK Finance, 2024. Auditors cannot guarantee fraud-free financial statements, yet a robust fraud risk assessment curbs exposure. Fraud indicators include:
- Unexplained cashflow swings
- Journal entries out of hours
- Suppliers with common directors
Management override is a perennial danger. We test journals around period-end, review key estimates for bias and, when needed, perform surprise procedures. Clear communication with audit committees ensures findings lead to action.
Embedding continuous risk monitoring
Audit is an annual snapshot, but well-run organisations monitor risk all year. We encourage:
- Quarterly reviews: challenge forecast accuracy and reassess RMM.
- Live dashboards: tie operational KPIs to financial metrics so deviations trigger alerts.
- Training: equip finance teams to recognise emerging threats and adjust controls promptly.
Integrating these disciplines strengthens risk management in audit and assurance beyond the statutory cycle.
Benefits of proactive risk management for your organisation
A mature risk framework delivers direct, measurable rewards:
- Lower cost of capital – lenders price certainty.
- Fewer HMRC enquiries – strong controls reduce adjustments, protecting cashflow.
- Better strategic decisions – reliable information underpins growth, acquisitions and exit planning.
The Office for Budget Responsibility expects tax to rise to 37.7% of GDP by 2027/28 (OBR, 2025). With fiscal scrutiny only intensifying, a disciplined approach to risk management in audit and assurance protects both reputation and the bottom line.
Take the next step
Audit quality and business resilience move in lockstep. By embedding risk management in audit and assurance throughout planning, testing and reporting, we help boards see beyond the ledger entries to the real-world threats and opportunities shaping performance. Our specialists combine sector insight with cutting-edge data tools to pinpoint the issues that matter, saving you time while raising confidence among investors and regulators alike.
Whether you need a fresh perspective on existing controls, a full statutory audit or advice on strengthening fraud defences, we have the experience and resources to support you. We work with listed groups, private companies and not-for-profits across the UK, tailoring our approach to each organisation’s goals and risk profile.
If you are ready to convert compliance into competitive advantage, contact our audit team today and discover how comprehensive risk management in audit and assurance can safeguard value and fuel growth.