Final answer:
Information risk refers to the potential for financial statements to be materially misleading, impacting investor decisions. Companies try to reduce this by implementing controls and audits, but some level of risk always remains.
Step-by-step explanation:
The risk to investors that a company's financial statements may be materially misleading is called information risk. This type of risk stems from the possibility that the financial statements could contain significant misstatements that impact investors' decisions. Companies mitigate information risk through internal controls and audits. However, even with these measures, there is no absolute certainty that the financial statements are free from errors or manipulation, which is why investors must consider this risk when evaluating potential investments.