There are several types of risks that must be evaluated by the auditor in the examination of the financial statements. These risks are:
Inherent Risk: It is the possibility that the balance of an account or a class of transactions by its nature, contains errors of relative importance, individually or jointly.
Control Risk: It is the possibility that the internal control system of a company does not prevent or detect, and correct in a timely, a significant error.
Risk of Detection: It is the risk that the audit procedures do not detect a material error or of relative importance.