Types of Risk:
Inherent Risk: The risk that an activity would pose if no controls or other mitigating factors were in place (the gross risk or risk before controls).
Residual Risk: The risk that remains after controls are taken into account (the net risk or risk after controls).
Detection Risk: Risk that the auditors fail to detect a material misstatement in the financial statements.
Control Risk: Risk that a misstatement could occur but may not be detected and corrected or prevented by entity’s internal control mechanism
Audit Risk: Inherent Risk x Control Risk x Detection Risk